FHA Programs:

• As the leading advocate for homeownership, the National Association of Realtors® strongly supports the Federal Housing Administration’s single- and multifamily mortgage insurance programs.

• The FHA single-family mortgage program has played an important and vital role in the mortgage marketplace. Nearly 33 million families have achieved the dream of homeownership through FHA since 1934.

• NAR has long maintained that the principal barrier to homeownership is accumulating the money needed for downpayment and closing costs.

• Many first-time home buyers rely on FHA loans to purchase a home, which only require a 3.5 percent downpayment, in many cases

• Major reforms in recent years and increased loan limits have greatly increased FHA's market-share. However, FHA continues to operate with 30-year old technology and limited staffing resources.

• Although FHA's capital reserve fund has fallen below the congressionally mandated level of 2 percent. FHA also has a cash reserve account separate from the capital reserve. FHA's actual total reserves are higher than they have ever been - with combined assets of $30.4 billion.

• Because FHA plays a vital role in helping families achieve the dream of homeownership, it must be strengthened and supported.

• FHA has taken steps to ensure its long-term financial soundness.

• NAR continues to lobby Congress to permanently increase the FHA loan limit.

• NAR continues to advocate on behalf of the FHA single-family mortgage insurance program and has called on Congress and the new administration to work together to appropriately fund the staffing and infrastructure that will complete FHA modernization.

Background

In October 2009, President Obama signed legislation that contained a provision to keep the existing higher FHA loan limits of 125 percent of the median home sales price, capped at $729,750. This increase is only temporary and will expire on December 31, 2010 to 115 percent of the median home sales price, capped at $625,500.



In October 2009, FHA announced that its capital reserve fund had fallen below the congressionally mandated level of 2 percent. The capital reserves are not FHA’s only reserve fund – FHA also has a cash reserve account separate from the capital reserve. FHA actual total reserves are higher than they have ever been – with combined assets of $30.4 billion. However, the drop in capital reserves has led Congress and the administration to call for changes to strengthen FHA.

In January 2010, FHA announced major changes to ensure its long-term financial soundness, including:

• The upfront mortgage insurance premium will increase but may be financed.

• Borrowers with a credit score below 580 will be required to have at least a 10 percent down payment (the minimum down payment will remain at 3.5 percent for all other borrowers).

• FHA will seek legislative authority to increase the annual premium (currently capped at 0.55 percent).

• Seller concessions will be reduced from 6 percent to 3 percent.

NAR partnered with FHA to create a toolkit for Realtors® and home