NEARLY 8
IN 10 AMERICANS SUPPORT BILL TO PROVIDE A SAFE
ALTERNATIVE TO HIGH COST SUBPRIME MORTGAGES
Minorities, first-time homebuyers and families in high-cost
areas strongly support FHA modernization, new survey shows
WASHINGTON - Nearly 80 percent of Americans support legislation
that would promote and protect the dream of homeownership by
providing a safer, fairer and more affordable mortgage alternative
to high-cost subprime loans, according to a new survey released
by Wells Fargo today. Speaking at the Wells Fargo Housing Symposium,
U.S. Housing and Urban Development Secretary Alphonso Jackson
said the survey demonstrates the urgent need for Congress to
pass legislation that would modernize HUD's Federal Housing
Administration (FHA) and help hundreds of thousands of borrowers
find an exit strategy from their exotic subprime mortgage loans
that could ultimately result in foreclosure.
Secretary Jackson acknowledges Helen Jean Burn, 81 years young
who received an FHA reverse mortgage.
"Americans want financially sound options...real choices,"
Jackson said during his speech highlighting the importance of
National Homeownership Month. "Americans are in support
of an FHA that could help even more first-time homebuyers and
people with moderate incomes have access to safer mortgages.
This survey demonstrates the urgent need for Congress to pass
legislation that modernizes the FHA to help both promote and
protect homeownership."
Jackson
added that he believes the housing market is making a needed
correction and will have a bright future. "The housing
market can, and will, continue to grow. After all, homeownership
stands near the all time high...at historic levels. Nearly 70
percent of all American families own a home. We should view
that fact with pride. But there is work to be done. If we are
going to stimulate growth in the housing market we will have
to wisely engineer some important changes" - including
a modernized FHA, Jackson said.
When
presented with a brief description of The Expanding American
Homeownership Act of 2007, legislation that would modernize
FHA, the Wells Fargo survey found that 77 percent of Americans
agreed that an improved FHA would be welcome so that more first
time homeowners and people with moderate incomes would have
access to mortgage loans with reasonable terms.
FHA
was created in 1934 during the Depression to stimulate the housing
market. Over the past 73 years, FHA has helped 34 million families
become homeowners. However, as the mortgage industry has changed
in recent years, FHA's products and practices have not had the
ability to adapt to evolving lending practices without Congressional
legislation. Many traditional FHA borrowers, with less-than-perfect
credit and little money for a downpayment, have turned to high-cost,
risky loan products, especially subprime loans, because FHA's
loan limits are too low and the downpayment requirement is too
stringent.
Borrowers
who took out subprime loans in 2005 and 2006 have begun to experience
increased payments. An estimated 80 percent of subprime loans
are sound, but the other 20 percent may be headed for trouble.
Many of these borrowers are having, or will have, difficulty
affording their new higher payments.
The
Wells Fargo survey found overwhelming support for the FHA reform
legislation from Americans near the average age of a first time
homebuyer. According to the survey, 83 percent of Americans
between the ages of 25 and 34 favor the legislation. The National
Association of Realtors reported that last year 43 percent of
first-time homebuyers purchased their homes with no downpayment.
Traditionally, first time homebuyers have sufficient income
to make the mortgage payment, but may lack sufficient funds
for a downpayment. By eliminating the current three percent
downpayment requirement for an FHA-insured loan and instead
offering low downpayment options, the legislation would allow
FHA to help more first time borrowers reach their goal of homeownership.
"I
hope Congress will listen to these Americans. With Congress's
support, we could help hundreds of thousands of people and we
could do so without exposing the taxpayers to extraordinary
risk. Through refinancing with FHA, tens of thousands of families
with subprime difficulties could be helped," Jackson added.
According
to 2005 HMDA (Home Mortgage Disclosure Act) data, 60 percent
of Black Americans and 53 percent of Hispanics are adversely
affected by abusive lending practices and pay an annual percentage
rate three percent higher than market rate when purchasing a
home. An overwhelming 86 percent of Black Americans and 81 percent
of Hispanics surveyed by Wells Fargo favored the proposed legislation.
Under President Bush's leadership, the minority homeownership
rate is at a historic high of 51 percent, and could grow even
higher if Congress passes The Expanding American Homeownership
Act of 2007. This legislation would enable many low to moderate
income minority families who would otherwise might be forced
into paying high interest rates from unscrupulous lenders to
instead qualify for FHA-insured mortgage loans.
The
Wells Fargo survey also found that nearly 8 in 10 (79%) Americans
from the Northeast and 75 percent of Americans in the West,
where real estate costs are highest, favored the FHA modernization
legislation. Currently, few borrowers in New York or California
can obtain an FHA-insured mortgage loan because FHA loan limits
do not provide sufficient funds for the cost of most homes in
these states. The Expanding American Homeownership Act of 2007,
which is similar to bipartisan legislation that was passed overwhelmingly
by the House last year, would raise FHA loan limits to enable
more buyers to meet the price of housing.
Of
families with children under 18, 81 percent also support the
legislation, according to the Wells Fargo survey. An additional
83 percent of those with children under 12 back the bill, which
will make it easier for the FHA to offer more borrowers low-cost
mortgage loans. According to a Harvard University study, children
of homeowners score 9 percent higher in math; score 7 percent
higher in reading; and are 13 percent more likely to graduate
high school.
The
national survey of 1,000 adults was conducted by The Mellman
Group, Incon behalf of Wells Fargo between June 8-11, 2007 and
has a margin of error of plus or minus 3.1 percentage points.
