On Friday, President George W. Bush and Secretary Jackson announced a new initiative called FHASecure, which will aid families who are finding themselves in default when their mortgage interest rates reset. Over the next two years, FHASecure and other FHA-backed loans will help an estimated quarter of a million Americans keep their homes. That's about half the families expected to go into foreclosure during that time.
In a follow-up letter to the chairmen of the Senate Banking Committee and the House Financial Services Committee, Jackson said another 200,000 families could keep their homes if Congress moves quickly to pass legislation reforming FHA. Jackson urged Senator Christopher Dodd and Representative Barney Frank to make passage of an FHA modernization bill a top legislative priority for the fall session.
"A modernized FHA is a critical component of the Administration's efforts to help more American families keep their homes during the current market turmoil. With so many more families facing increased mortgage payments every day, the time to act is now," Jackson said in his letter to Dodd and Frank.
Last year, the Bush Administration proposed a set of changes to the FHA program that would expand its reach by eliminating outdated downpayment requirements and raising loan limits across the country. The bill, the Expanding American Homeownership Act of 2006, passed the House with overwhelming bipartisan support in July 2006 by a vote of 415-to-7 and has been reintroduced this year.
Since 1934, FHA has helped more than 35 million families become homeowners. However, FHA has been unable to keep pace as lending practices have evolved and modernized. If Congress enacts legislation to reform this critical mortgage insurance program, FHA will be able to better adapt to today's marketplace and serve as a more viable solution to predatory lending and the exotic loan market.
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Text of Secretary Jackson's letter to Senator Dodd and Frank:
Dear Chairmen Frank and Dodd, September 5, 2007
With Congress returning this week from its August recess, I am writing to urge you to make passage of a Federal Housing Administration (FHA) reform bill, a top legislative priority for the fall session. A modernized FHA is a critical component of the Administration's efforts to help more American families keep their homes during the current market turmoil.
On Friday, August 31, I joined President Bush and Treasury Secretary Henry Paulson in announcing FHASecure, a plan to allow the Federal Housing Administration to make it easier for families with strong credit histories who had been making timely mortgage payments before their loans reset - but are now in default - to qualify for refinancing. FHASecure will bring stability to the housing market and give eligible families, who were in good financial standing before their loans reset, a chance to keep their homes.
According to industry estimates, there are just under 2 million resets due in the next two years. About one quarter, or 500,000 of those mortgages are going to default. Under FHASecure, we can help approximately half or 240,000 of those hard-working families stay in their homes without using any taxpayer dollars. If Congress approves legislation to modernize FHA, as the President and I have called for, we could help another 200,000 families get into a safe, fair, and affordable FHA-backed loan.
I know you share my strong support for modernizing FHA. With many more families facing increased mortgage payments every day, the time to act is now. Please know I stand ready to work with you to pass a bipartisan, comprehensive FHA modernization bill that will help many families realize and maintain the American Dream of homeownership.
Sincerely,
Alphonso Jackson
NOTE: HUD is the nation's housing agency committed to increasing homeownership, particularly among minorities; creating affordable housing opportunities for low-income Americans; and supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development and enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet at www.hud.gov and espanol.hud.gov.
