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Dr. Carson says improvements to HUD will happen

Real Estate Report
By Lauren Bunting | Jun 01, 2017

(June 2, 2017) At last week’s National Association of Realtors (NAR) Legislative Meetings & Trade Expo, presenter Dr. Ben Carson, secretary of Housing and Urban Development, received loud applause when he told attendees that HUD is working to make improvements with the goal of ushering in a new era of homeownership.

“It’s important to be able to learn from success and from failure,” Carson said. “That’s what wisdom is all about.”

NAR for years has pushed for reforms at the Federal Housing Administration – a program office under HUD’s jurisdiction – that would make it easier for homebuyers to utilize FHA’s low-down payment financing options.

One example is NAR’s call for FHA to address current restrictions on the treatment of condominiums. Pending since September 2016 is an NAR backed rule that would make it easier to buy a condo with FHA financing. Carson said that on the issue of condos, HUD’s position is in “lock step” with that of Realtors. “I can assure you that this rule has very high priority,” Carson said. “I think it will make a big difference to a lot of Americans.”

Realtors have also long-supported an end to so-called “life of loan” mortgage insurance. On a conventional mortgage, borrowers typically must pay for mortgage insurance if they have less than 20 percent equity in the property. When the homeowner reaches that 20 percent equity mark, they’re usually able to cancel the mortgage insurance and put those monthly payments back in their pocket.

With an FHA mortgage, however, borrowers must maintain costly mortgage insurance for the entire life of the loan. That needlessly takes money from the consumer and offers an incentive for strong borrowers to leave the program, potentially weakening FHA’s book of business. For those reasons, eliminating the life of loan requirement is a priority for Realtors.

In addition to condo rules and life of loan mortgage insurance, reinstating a cut to the mortgage interest premium FHA charges for its loans was also discussed during a Q & A session with Carson. FHA announced at the beginning of the year that it was cutting annual premiums consumers pay for mortgage insurance from 0.85 percent to 0.60 percent, but the cut was rescinded under the new administration just a few weeks later. FHA has said that the decision to reinstate the cut is still under review.

— Lauren Bunting is an Associate Broker with Bunting Realty, Inc. in Berlin.

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