Brian Montgomery, head of the mortgage loan insurance programs at the Federal Housing Administration, announced significant changes that will make it easier for consumers to use and Realtors(r) to promote FHA products.
Speaking at a forum during the 2005 REALTORS(r) Conference & Expo here, Montgomery, assistant secretary for housing-Federal Housing Commissioner at the Department of Housing and Urban Development, said FHA will no longer have specialized FHA appraisals and will allow homebuyers to fold into their mortgage up to $35,000 in home repairs or minor remodeling.
The former met with applause from the Realtor(r) audience. Specialized FHA appraisals often required a laundry list of repairs that had to be made before settlement, that often delayed settlement, killed the transaction, or prompted Realtors(r) and lenders to direct homebuyers elsewhere for a mortgage. Required repairs were time-consuming and often unclear, and many times were minor, but underwriters were afraid to waive the requirements.
"The appraisals were intended to ensure that a property financed by FHA was in good condition for the borrower. Unfortunately, these appraisals drove you, our partners, and the prospective borrowers away from FHA," Montgomery said. "We've changed all that now."
FHA will continue to work with Realtors(r), lenders and appraisers to be consistent with the rest of the market, Montgomery said, and will no longer impose unnecessary repairs or require inspections and evaluations that aren't customary for an area. "Instead, we will accept the new Fannie Mae appraisal forms," he said.
"Similar to Fannie Mae and Freddie Mac, we will defer to state and local requirements regarding the condition of the home," Montgomery said.
The new version of the "Streamlined (k)" loan will permit homebuyers to finance up to $35,000 in their mortgage to pay for straightforward home repairs, like replacing a roof, windows or furnace.
"The program is a financing tool for the average homebuyer who wants to make simple changes, such as updating the appliances or replacing flooring or installing new windows to make the home more energy efficient," he said. "You, as the buyer's agent, can assure your homebuyers that they can close on the house, and then make the repairs."
He noted that the two major changes are the first of many, and that the recommendations came from the real estate industry. He assured the Realtor(r) audience that FHA is continuing to study its operations and programs, and to consider changes recommended by users, Realtors(r), and lenders.
Montgomery said he was nominated by President Bush several months ago because the president saw FHA as an organization in need of revitalization. "FHA was set up originally to play a critically important role in the American housing market, to serve as an innovator, and help underserved families," he said. But FHA has fallen behind in its mission, he said, and that was not acceptable.
"FHA needs to be compatible with the rest of the industry. I feel very strongly that FHA is here to serve the American public in a way that protects the consumer. But consumer protection that drives away the consumer is no protection at all," he said. "Bottom line: FHA is under new management and we are changing. We'll be bringing you a lot more than you've had in the past."
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The National Association of Realtors(r), "The Voice for Real Estate," is America's largest trade association, representing more than 1 million members involved in all aspects of the residential and commercial real estate industries.
Information about NAR is available at http://www.realtor.org. This and other news releases are posted in the Web site's "News Media" section in the NAR Media Center. REALTOR(r) is a registered collective membership mark which may be used only by real estate professionals who are members of the NATIONAL ASSOCIATION OF REALTORS(r) and subscribe to its strict Code of Ethics.
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Source: U.S.Newswire