FHA’s HAWK program a good start but not enough
WASHINGTON – July 1, 2014 – In a letter sent to the U.S. Department of Housing and Urban Development (HUD) yesterday, the National Association of Realtors® (NAR) voiced support for the Federal Housing Administration's (FHA) efforts to reduce mortgage insurance premiums for first-time buyers through its Homeowners Armed with Knowledge (HAWK) counseling pilot program.
But NAR said it's worried that the program won't significantly reduce premiums or reach enough qualified buyers.
"Realtors are concerned about FHA's high annual mortgage insurance premiums and the insurance requirement for the life of the loan," said NAR President Steve Brown. "FHA fees make up nearly 20 percent of a monthly mortgage payment today and are making it more difficult for qualified buyers to purchase a home. Since FHA is on target to meet and exceed its capital reserve requirements in the next fiscal year, we encourage FHA to support premium reductions across the board."
First-time homebuyers participating in HAWK's four-year pilot program receive a 50 basis points reduction in the upfront mortgage insurance premium and a 10 basis points reduction in the annual premium. If buyers complete post-closing housing counseling and do not have delinquencies greater than 90 days in the first 18 months after closing, they receive an additional 15 basis points reduction on the annual premium starting in the loan's 25th month.
In its letter, NAR said HAWK fees could be prohibitive to buyers if lenders or counseling agencies can't pay their share of required fees. It encouraged FHA to coordinate with other pre-purchase counseling programs, which also typically include fee-based education.
According to NAR, it could take buyers two years to offset the cost of counseling with the premium reductions offered under the HAWK program – and even longer if buyers must pay other financial programs separately.
NAR also urged for expansion of the program to repeat buyers.
Brown said NAR also has concerns about the amount of time it will take buyers to access and complete the counseling program. If renters decide not to renew at the end of their lease and contact a real estate agent to begin the home search process, they could be pushed beyond their target move-out date if the next available counseling class isn't for 30 to 60 days.
NAR plans to work with FHA to educate members and consumers about the availability and benefits of the HAWK counseling program, and it recommends that FHA heavily market the program to lenders, real estate agents and consumers.
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