Think tank director says FHA is more crucial than ever

March 10th, 2015

Many analysts believe homebuyers could benefit from counseling before receiving a mortgage.

Many analysts predict the housing market is heading in the right direction for 2015, but Julia Gordon, the Center for American Progress’ director of Housing Finance and Policy, believes the recovery is uneven. While testifying before the U.S. House of Representatives Committee on Financial Services Subcommittee on Housing and Insurance, she said the role of the U.S. Federal Housing Administration (FHA) is integral if the areas that have a slower recovery will be able to catch up.

“Going forward, FHA should continue to assisting first-time and low-wealth borrowers, provide stability in the mortgage market and maintain the insurance fund’s financial integrity,” Gordon said. “While Congress should provide necessary oversight to ensure FHA is pursuing this mission in a responsible fashion, FHA needs the authority and latitude to make certain business judgments within the congressionally mandated framework.”

Gordon certainly isn’t the only analyst who believes the housing market needs more assistance following the economic downturn. In fact, her colleague Sarah Edelman, a housing expert at the Center for American Progress, and Brian Theodos, a senior research associate at the Urban Institute, have made similar claims in the past.

The issues consumers face in the housing market
Based on Gordon’s testimony, one major challenge still holding back many Americans from buying a house is lending requirements. The FHA, as well as government-sponsored enterprises Freddie Mac and Fannie Mae, already took steps to improve credit availability by offering loans that have lower mortgage insurance premium and down payment requirements, respectively. Furthermore, the economy is performing well, with the latest Beige Book from the Federal Reserve showing positive consumer spending, employment and other activity.

As consumers find the jobs and wages to save more, afford a down payment and appear to be more creditworthy borrowers, Gordon believes they would further benefit from successful implementation of the FHA’s Homeowners Armed with Knowledge (HAWK) program, which gives homebuyers more affordable mortgage insurance premiums if they participate in homeowner counseling.

Despite a promising future for the HAWK program, budget decisions halted the its start. Gordon wants Congress to reverse this action, as the program can not only provide more consumers with home loans but also give them the tools they need to successfully pay their mortgage bills each month.

The importance of a helping hand
The theme of providing more support services to homebuyers is evident across the housing industry. Freddie Mac’s low-down-payment program, for example, requires counseling before consumers can get a loan. Following the housing downturn, regulators want to make smarter homebuyers, a goal Gordon believes is necessary.