David H. Stevens, president and CEO of the Mortgage Bankers Association (MBA), testified yesterday before the U.S. House of Representatives Financial Services Subcommittee on Housing and Insurance at a hearing entitled "Sustainable Housing Finance: Perspectives on Reforming the FHA."
Stevens’ remarks included:
Given the circumstances facing FHA in the single-family market, my oral statement focuses on that sector. My written testimony includes our views on FHA’s critical role in multifamily rental housing as well.
FHA has never played such an important role in the housing market. Today, it is the dominant source of mortgage finance for borrowers with low down payments and those without high incomes or inherited wealth. Many of these are first-time homebuyers, young families looking to put down roots in a community, and a segment that must be served if we are going to grow our economy and sustain the housing recovery.
Since the onset of the housing crisis, when FHA’s books suffered like everyone else’s, the agency has taken a number of steps to address losses in its single-family portfolio, by raising mortgage insurance premiums, increasing down payment requirements for certain borrowers, eliminating the approval of loan correspondents, raising lender net worth requirements, re-examining reverse mortgage policies, and establishing the Office of Risk Management.
By making these changes, FHA has moved swiftly to protect taxpayers and the fund. The credit profile and performance of the 2010 to 2012 portfolios demonstrate the effects of these changes. For example, the average FHA credit score for 2011 was 696, up from a historical average closer to 650. More importantly, these books are projected to contribute significantly to the economic value of the MMI fund over the next several years.
Looking ahead, MBA believes further programmatic changes at FHA must balance three priorities: restoring financial solvency; preserving FHA’s critical housing mission; and maintaining the agency’s countercyclical role. We continue to work with our members to develop additional policy changes regarding FHA’s future.
