FHA Reveals “Blueprint for Access” for Improving Access to Underserved Home Buyers
This week, the Federal Housing Administration revealed its “Blueprint for Access,” which outlines steps the agency will take to expand credit access to “underserved borrowers.”
According to the FHA, qualified buyers are currently underserved in the market, as it has become hard for potential borrowers with less-than-perfect credit to qualify for a mortgage. Around 13 million people with credit scores under 752 — the average score for Fannie Mae and Freddie Mac loans — are shut out from the housing market.
These steps include encouraging broader use of counseling. HUD will publish a notice this week in the Federal Register for the Homeowners Armed with Knowledge (HAWK) pilot program to incorporate more housing counseling into the home buying process for borrowers choosing FHA-insured financing.
Under the new pilot program, buyers will qualify for savings on their FHA loan by completing HUD-approved counseling through a nonprofit organization that gives borrowers tools to understand their rights and responsibilities. This is designed to improve budgeting and wise housing decisions among buyers.
The average buyer under the 4-year HAWK program would save about $325 a year, or nearly $9,800 on the life of their loan. Buyers who complete the program receive a 50 basis point reduction in their upfront FHA mortgage insurance premium and a 10 basis point reduction in their annual FHA MIP, along with an additional 15 basis point reduction in annual MIP after two years with no serious delinquencies.
The Blueprint for Access will also enhance quality assurance through the FHA. HUD released new information on FHA’s Quality Assurance Initiative.
“We want to work with lenders to provide clarity and transparency in FHA’s policies to encourage lending to qualified borrowers across the credit spectrum,” the FHA said. “We believe changing the way in which we provide policy direction and monitor lender compliance and performance better protects FHA and reduces uncertainty for lenders in their interactions with HUD.”
The FHA also plans to create a national lender performance metric to supplement the Lender Compare Ratio that compares the rate of early defaults and claims for single-family loans within an area. This metric will analyze lender performance based on their default rate within three credit score bands and compare it to the FHA target rate rather than other lenders.
“This is a win for families, FHA, lenders, realtors and the overall market, which is why we are very excited about its potential impact,” said Shaun Donovan, Secretary of the U.S. Department of Housing and Urban Development. “We want to create an environment that encourages responsible behavior and provides clear rules of the road so lenders can originate loans without fear of unanticipated consequences. We want lenders to be able to focus on the quality of their processes and lend to all qualified borrowers.”