Expanding American Homeownership Act of 2007
September 18, 2007
Rep. Maxine Waters [D-CA]: I rise in support of H.R. 1852, the Expanded American Homeownership Act of 2007. As you know, I introduced H.R. 1852 on March 29, 2007, and I want to take this time to thank Chairman Frank for his original cosponsorship. I also want to acknowledge each of my colleagues both on the Committee on Financial Services and in the House who have joined with me to see that this important legislation passes the House.
It has been a little over 4 months since the Committee on Financial Services considered this measure to revitalize the Federal Housing Administration, or FHA. On May 3, 2007, the expanding American Homeownership Act passed the Committee on Financial Services by a vote of 45-19.
The ensuing period has only made the need to enact H.R. 1852 clearer. We are all aware of the turmoil in the mortgage markets with the dramatic rise in foreclosures. Some predict as many as 2 million mortgage loan defaults by year's end. Equally troubling is the widening impact that the mortgage crisis is having within the domestic and global economy. We still don't know the full scope of that impact, but it is clear that we must take prudent steps to address the underlying issues in the housing markets.
H.R. 1852 is a necessary step in that direction. To be clear, this legislation will not by itself resolve the crisis. Indeed, later this week the Committee on Financial Services will hold a hearing to discuss the major players in government and the markets' other strategies to address this multi-faceted problem.
Revitalizing FHA, however, is an essential element of a comprehensive strategy. FHA is a federally insured loan program that for over 60 years has been a reliable source of affordable fixed-rate mortgage loans, especially for first-time home buyers.
At the end of funding year 2006, FHA had $338.6 billion of insurance in force on about 3.9 million loans. From 1934 through the end of funding year 2006, FHA had insured about $33.9 million home loans at a mortgage volume of about $1.9 trillion.
Once the preeminent provider of mortgage insurance to low- and moderate-income home buyers, FHA has seen a precipitous drop in its market share in recent years. In 1991, FHA loans accounted for about 11 percent of the market. By 2004, that share had dropped to about 3 percent.
Borrowers have increasingly turned to the private subprime market for loans, many of which contained adjustable rates that are now resetting, or will do so in the near future. In the absence of significant appreciation in the values of their homes, many of these borrowers will be unable to refinance to ensure affordable monthly payments into the future.
H.R. 1852 will enable FHA to serve more subprime borrowers at affordable rates and terms, recapture borrowers that have turned to problematic subprime loans in recent years, and offer refinancing loan opportunities to borrowers struggling to meet their mortgage payments in the midst of the current home price and mortgage market turbulence.
Specifically, this bill would authorize zero and lower down payment loans for borrowers that can afford mortgage payments but lack the cash for required down payment, a major reason that many low-income borrowers turn to private subprime markets rather than FHA-insured loans. It will increase loan limits to make FHA relevant in high-cost markets, direct FHA to provide mortgage loans to high-risk, but qualified, buyers; it will enhance the FHA reverse mortgage loan program, promote the sale of foreclosed FHA rental housing, loans to localities so that affordable housing can be maintained in local communities, authorize up to $300 million a year for the next 5 fiscal years from the bill's excess profits for an affordable housing fund instead of returning such funds to the general treasury.
Notably, H.R. 1852 also includes a number of important changes to the FHA bill that passed the House last year. First, it eliminates the fee increases from last year's bill for borrowers that continue to make a down payment, scaling back the maximum upfront fee from 3 percent to 2.5, and the maximum annual fee from 2 percent to .55 percent.
These reductions would reduce FHA closing costs premiums for a hypothetical family buying a $300,000 home by $2,250, and annual fees over a 5-year period by over $20,000 compared to last year's bill.
This bill also includes a provision authorizing loan limit increases for FHA rental housing loans in high-cost areas where current FHA loans do not keep pace with local construction costs. In this way we are ensuring that FHA contributes to the full range of affordable housing stock we so desperately need in this country, from homeownership to rental housing.
In that vein, H.R. 1852 also differs from H.R. 1752 in a final, absolutely critical respect. This bill recognizes the full scope of the affordable housing crisis facing the Nation by targeting up to $300 million annually for the next 5 years to an affordable housing fund for grants to provide affordable rental housing and homeownership opportunities for low-income families.
This measure is clearly needed. We can thank Barney Frank for all of the work and all of the attention and time that he put into making sure that this was a part of this bill. Simply put, this country faces an affordable housing crisis of epic proportions. According to Harvard University's State of the Nation's Housing in 2007 report, 17 million renters and homeowners are paying more than half their incomes in housing costs. There just isn't enough affordable housing stock to go around.
With that, and in closing, I have said for many years that there is an affordable housing crisis in America. In recent months that crisis has exploded beyond the poorest renters and homeowners, to threaten the domestic economy. H.R. 1852 is a necessary step, though not in itself a sufficient one, in walking us back from the brink and the direction of meeting the housing needs of all Americans.
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Contact: Mikael Moore
202-225-2201
