Moderate-income home buyers got a big boost from Congress

With brokers able to offer both private-market subprime and FHA-insured mortgages, buyers with less-than-perfect credit will be able to directly compare the FHA’s rates, fees and consumer protections with competing subprime loan offerings.

The House bill, the Expanding American Homeownership Act of 2006 (H.R. 5121), would reopen the FHA program to consumers in large parts of the country where home prices far outstrip statutory limits on maximum FHA mortgage amounts.

The Fannie Mae-Freddie Mac limits move up annually as home prices increase.

Another key change: The FHA would join the rest of the mortgage market in underwriting home buyers based on their risks of default as measured by credit scores, down-payment amounts and financial profiles.

The bill would authorize the agency to charge lower insurance premiums to applicants with lower risks of default — a standard operating procedure in the private marketplace.

The housing subcommittee, which has immediate jurisdiction over the bill, is chaired by Sen.

FHA Commissioner Brian D. Montgomery says he has full confidence in his agency’s ability to assess credit risks — something it has done for decades at no cost to the Treasury.

“We think we are on the side of the consumers,” Montgomery said in an interview following the House vote. (Read More)

Source: Washington Post

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