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Special Reports
Secondary Market
Commish Says FHA to Return to Prominence
Federal housing commissioner Brian Montgomery gave several clues about what he
is looking for in reform of the Federal Housing Administration program.
Speaking at the Regional Conference of Mortgage Bankers Associations here, he
declared that as FHA commissioner, the program is committed to providing opportunities for families buying homes.
FHA has faltered in recent years, in large part because it is offering the same
products it did in 1934 when Congress passed the law that still governs the program. He is concerned because as
an alternative, consumers have turned to higher-cost, more exotic loan products. Thus, FHA is not fulfilling its
mission very well.
He is "committed to bringing FHA into the 21st century." The program
gives those with little savings "well-priced options."
On the process side, the agency is undertaking changes that will make it more
compatible with the conforming market. For example, changes in its appraisal procedures are "realigning us
with the rest of the industry." These revisions, he said are "common sense changes" to the FHA program.
To be truly effective, FHA needs the law amended to allow it to offer improved
products, letting it reach deeper into the borrower pool.
The current system of FHA loan limits is a "disincentive," Mr. Montgomery
said, for lenders to offer FHA products. His goal is not just to raise the FHA limits but also to simplify the
system. Unless changes are made, people will continue to resort to high-cost, more risky loans.
He also spoke of making changes in the condominium, manufactured housing and home-equity
conversion mortgage programs.
FHA is looking to make condo loans through the 203(B) program. For the manufactured
housing program, he wants to have FHA have the ability to purchase loans on a loan-by-loan basis instead of the
current portfolio basis.
Mr. Montgomery wants to create a program where HECMs can be used for purchase
loans.
He also wants to have the limit on the number of HECMs FHA can insure be lifted
and to create a single nationwide loan limit for HECMs.
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