Survey: Americans support FHA modernization

When presented with a brief description of The Expanding American Homeownership Act of 2007, which would modernize the U.S. Department of Housing and Urban Development’s Federal Housing Administration, 77 percent of Americans agreed that an improved FHA would provide more first-time homeowners and people with moderate incomes with access to mortgage loans with reasonable terms.

FHA was created in 1934 during the Great Depression to stimulate the housing market. In the past 73 years, FHA has helped 34 million families become homeowners.

However, as the mortgage industry has changed in recent years, FHA’s products and practices have not had the ability to adapt to evolving lending practices without congressional legislation.

Many traditional FHA borrowers, with less-than-perfect credit or little money for a down payment, have turned to high-cost, risky loan products, especially subprime loans, because FHA’s loan limits are too low and the downpayment requirement is too stringent.

“Americans want financially sound options ... real choices,” said HUD Secretary Alphonso Jackson at the Wells Fargo Housing Symposium, according to a news release.

“Americans are in support of an FHA that could help even more first-time homebuyers and people with moderate incomes have access to safer mortgages. This survey demonstrates the urgent need for Congress to pass legislation that modernizes the FHA to help both promote and protect homeownership.”

The legislation would modernize HUD’s Federal Housing Administration and help hundreds of thousands of borrowers get out from under subprime loans that could ultimately result in foreclosure.

The Wells Fargo survey found overwhelming support for the FHA reform legislation from Americans near the average age of a first-time homebuyer. Data showed that 83 percent of Americans between the ages of 25 and 34 favor the legislation, which would eliminate the current 3 percent down-payment requirement for FHA-insured loans and offer instead low down-payment options.

Borrowers who took out subprime loans in 2005 and 2006 have begun to experience increased payments.

An estimated 80 percent of subprime loans are sound, but the other 20 percent may be headed for trouble, according to HUD.

Many of these borrowers are having, or will have, difficulty affording their new higher payments.

“Nearly 70 percent of all American families own a home,” Jackson said. “We should view that fact with pride. But there is work to be done. If we are going to stimulate growth in the housing market, we will have to wisely engineer some important changes.”

The national survey of 1,000 adults was conducted June 8–11 by The Mellman Group Inc.