FHA premiums, fair housing, appraisal requirements top list of industry concerns for HUD

The current administration made reducing regulatory burden a main priority early on, announcing an executive order on the issue not too long after President Donald Trump started his term.

Under the executive order, “Reducing Regulation and Controlling Regulatory Costs,” the Department of Housing and Urban Development and other government agencies are tasked with reviewing existing regulations to assess its compliance costs and reduce regulatory burden.

In addition to assessing its rules, HUD is in the process of establishing a regulatory task force to identify agency regulations that should be repealed replaced, or modified.

And HUD’s not doing it alone. HUD invited the public to provide comments to assist in identifying existing regulations that may be outdated, ineffective, or excessively burdensome. Specially, HUD asked interested parties to comment on areas such as:

  • Are there any HUD regulatory requirements that have been overtaken by technological developments?
  • What factors should HUD use when considering how to prioritize rules when implementing the regulatory offsets required by Executive Order 13771?
  • Are there any existing HUD requirements that duplicate or conflict with requirements of another Federal agency? Can the requirement be modified to eliminate the conflict?

The Community Home Lenders Association and the National Association of Realtors are two of the groups that submitted letters to HUD before the comment period ended earlier this week. 

While there are some overlapping points from the two associations, since they do represent different groups, they each also have distinct concerns that they addressed in their letters.  

For starters, both groups brought up the Federal Housing Administration mortgage insurance premiums.

FHA premiums became a hot topic pretty quickly under the Trump administration since one of President Donald Trump’s first presidential actions was to suspend the reduction of FHA premiums. 

NAR stated in its letter, “FHA should lower the historically high annual insurance premiums, reducing cost for borrowers and improving their chances to withstand life events that could otherwise lead to default.”

NAR also urged HUD to get rid of the life of the loan mortgage insurance requirement for FHA loans.

“FHA and its borrowers would greatly benefit from eliminating the life of loan requirement. Cancellation of the premium would reduce the borrower’s monthly payments, providing them with more cash on hand so they may better withstand economic shocks and thereby reduce defaults,” the letter stated. “In the interest of strengthening FHA’s finances, NAR urges FHA to remove the life of loan annual mortgage insurance premium for all borrowers that reach 78% LTV, assuming the borrower has paid the annual mortgage insurance premiums for at least five years.”

Similarly, CHLA recommended that FHA reduce the annual insurance premium on forward loans from .85% to .55%. “We note that even with this change, overall premium levels would still be higher than the levels in place before premium increases designed to replenish the MMIF in response to the 2008 housing crisis, and the FHA forward loan program would still generate an annual net profit of almost $4 billion,” the letter stated.

CHLA also recommended that HUD eliminate the life of the loan policy implemented in 2013.

Meanwhile, NAR zeroed in on the needs in affordable housing, noting “the continued existence of segregated communities and concentration of poverty in non-white communities is an indictment of our failures to adequately address the promise the Fair Housing Act includes.”

While NAR fully supports the Fair Housing Act’s requirement that the Department implement its programs in a manner that affirmatively furthers fair housing, it has concerns.

“NAR believes HUD should not be identifying specific approaches to addressing housing disparities. That solution should be ‘home grown,’” the letter stated. “HUD’s role should be simply to require the assessment, inclusion of community input, and the creation of actions that can be measured relative to those fair housing issues. HUD should not be stating a preference or recommendation for one type of action over another.”

CHLA, however, took the time to highlight concerns in the appraisal process, asking for the elimination of the duplicative appraisal form requirement and a more streamlined appraisal process.

“CHLA recommends that FHA review the processes used by Fannie Mae and Freddie Mac, with respect to their Collateral Underwriter process for appraisals, and partner with or use similar processes to provide for more streamlined treatment,” the letter stated.

Overall, both associations thanked HUD for the opportunity to comment and help the HUD task force in eliminating regulatory burdens on the housing industry.