The Expanding Homeownership Act of 2007
On September 18th, the House passed the Expanding Homeownership Act of 2007, H.R. 1852. This bill will revitalize the Federal Housing Administration (FHA), which was established to provide a reliable source of affordable mortgage loans for first-time homebuyers. The bill will enable the FHA to serve more subprime borrowers at affordable rates and terms, to attract borrowers that have turned to predatory loans in recent years, and to offer refinancing to homeowners struggling to meet their mortgage payments in the midst of the current turbulent mortgage markets.
The mortgage crisis threatens thousand of American families and the economy:
- Some 2 million Americans will see their mortgage payments jump over the next two years, because of an increase in adjustable-rate mortgages.
- Experts estimate that up to 40 percent of current subprime borrowers could qualify for fixed rate loans, so strong efforts to assist borrowers could curtail the subprime crisis.
- The number of homeowners receiving foreclosure notices hit a record high in the spring, for the third quarter in a row -- driven up by problems with subprime mortgages.
- Because of current restrictions on the Federal Housing Administration, more borrowers have turned to the subprime mortgage market for loans.
- Reforms FHA to serve more families seeking to buy a home, including those currently forced to borrow from subprime lenders.
- Authorizes zero and lower down payment loans to help borrowers who can afford mortgage payments, but not the down payment.
- Increases FHA loan limits to serve families in higher cost markets.
- Directs FHA to serve higher risk borrowers who would otherwise be forced to turn to predatory and high priced mortgage loan alternatives, and authorizes HUD to set risk-based fees for these higher risk borrowers.
Strengthens protections for higher risk FHA borrowers:
- More than doubles federal funding for housing counseling, to help subprime homebuyers who fall behind on their mortgage payments, and requires counseling for higher risk FHA borrowers prior to purchasing their home.
- Requires disclosures regarding the costs associated with lower down payment loans, so that borrowers can make a more informed decision about the type of loan they should take out.
Extends FHA-backed loans for homeowners struggling with mortgage payments:
- Directs HUD to offer refinancing loans to help borrowers currently in default or at imminent risk of being in default – expanding on the Bush Administration proposal to serve 80,000 families.
- Permits the FHA to offer zero and lower down payment loans in refinancing home loans.
Increases affordable housing, building on the progress Congress is already making:
- Affordable Housing Fund. Authorizes up to $300 million a year for affordable housing from the bill’s excess profits, resulting from expanding FHA loans.
- More affordable rental housing. The bill boosts FHA multifamily loan limits in high cost areas, to ensure that loans can cover the cost of construction, and bars the Bush Administration’s pending proposal to raise fees on FHA multifamily loans.
Enhances FHA’s reverse mortgage program for seniors to get cash out of their house:
- Eliminates a volume cap on reverse mortgages and raises loan limits for seniors so that seniors that own their home can mortgage their home to pay for high health care bills and other expenses.
- Reduces by 33% the maximum fee loan originators can charge senior citizens for reverse mortgage loans.