While the National Association of Realtors (NAR) is generally in support of the Federal Housing Administration's (FHA) efforts to reduce mortgage insurance premiums for first-time buyers through its new Homeowners Armed with Knowledge (HAWK) counseling program, it is concerned that the fees borrowers will have to pay for counseling will offset the savings generated through the program.
It could take buyers up to two years to offset the cost of counseling with the premium reductions offered under the HAWK program and even longer if buyers have to satisfy other financial programs separately, NAR officials wrote in a letter to the U.S. Department of Housing and Urban Development (HUD) this week. NAR officials say they would rather see the FHA reduce some of its fees in order to deliver savings to home buyers.
What's more, NAR is concerned that the amount of time it takes to complete the program could end up causing problems for borrowers. For example, if renters decide not to renew 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 more days.
The new incentive program, which was introduced in May, aims to give borrowers ‘tangible savings’ on FHA-insured home loans when they complete housing counseling before and after closing. Borrowers who complete HUD-approved housing counseling before signing a contract to purchase a home and who complete additional pre-closing housing counseling will receive a 50-basis-point reduction in the upfront FHA mortgage insurance premium (MIP) and a 10-basis-point reduction in the annual FHA MIP.
That equates to approximately $325 a year – or almost $9,800 over the life of their loan, the FHA claims.
In addition, borrowers who participate in post-closing counseling and who have a track record of timely mortgage payments over the first two years will receive an additional 15-basis-point reduction in annual MIP.
The counseling is provided through independent nonprofit organizations that give borrowers the tools they need to understand the rights and responsibilities of homeownership.
‘As the leading advocate for homeowners, Realtors are concerned about FHA's high annual mortgage insurance premiums and the insurance requirement for the life of the loan,’ says Steve Brown, president of NAR and co-owner of Irongate Inc. Realtors in Dayton, Ohio. ‘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.’
In addition, NAR officials wrote that they'd like to see the HAWK program expended to repeat buyers.
The program is being offered as part of the FHA's ‘Blueprint for Access’ initiative, which aims to expand access to credit for underserved borrowers. In addition, as part of the program, FHA is seeking to improve its quality assurance efforts. As such, HUD has released more information on the FHA's Quality Assurance Initiative, intended to provide greater clarity and transparency to FHA-approved lenders to encourage lending to qualified borrowers across the credit spectrum.