House Overwhelmingly Approves Landmark FHA Legislation

Would Increase Homeownership and Enact Comprehensive Reforms

The U.S. House of Representatives passed the non-controversial bill HR5121, the Expanding American Homeownership Act of 2006. It is billed as a vehicle to modernize the Federal Housing Authority (FHA) to look and act more like the private market, decrease premiums for borrowers and increase access to homeownership.
Provisions included in the Expanding American Homeownership Act do the following:

• Increase the conforming loan limits for lower-cost and higher-cost areas;

• Increase the maximum loan term from 30 to 40 years;

• Balance borrower’s financial profile and needs with an appropriate premium;

• Increase loan limits for two-, three- and four-family residences;

• Revise the definition of mortgage to insure condominiums as a single-family unit rather than a multifamily project;

• Eliminate FHA’s 3 percent cash down requirement to offer no-down payment loans; and

• Allow FHA to adjust the mortgage insurance premium to match the borrower’s risk.

It had been apparent during ASHI’s discussions with the Department of Housing and Urban Development (HUD) that the agency wanted to adopt more market-based features to remain relevant compared to private-sector financing, and this bill reflects that desire.

ASHI’s comments are consistent with what has been said in the Society’s past conversations with federal agencies: allowing lower-income buyers to obtain financing creates an increased need for the buyers to know the condition of the homes—and the best way to do that, of course, is via a home inspection.

As barriers to homeownership are lowered, there is a heightened need to educate consumers on the value of a quality home inspection. ASHI will be in the forefront carrying this message to Capitol Hill.