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23 » VISIT US ONLINE @ DSNEWS.COM REALTORS URGE FHA TO CHANGE RULES ON PREMIUMS As the Federal Housing Administration (FHA) continues working to get its Mutual Mortgage Insurance (MMI) Fund back on its feet following massive losses sustained after the housing crash, realtors are asking the agency to rethink its approach to shoring up its finances. In a letter addressed last month to FHA com- missioner Carol Galante, National Association of Realtors (NAR) president Steve Brown wrote that the administration's decision to increase annual mortgage insurance premiums and to require mortgage insurance over a loan's entire life are putting home purchases "increasingly out of reach for many qualified borrowers who rely on FHA financing." Both changes were instituted in early 2013 to help restore the agency's mortgage insurance fund, which was revealed months before to be at a capital reserve ratio of -1.44 percent (FHA is required to keep the fund's ratio at 2 percent). e hit to its finances required the agency last year to take a bailout for the first time in its nearly 80-year history. With FHA now projecting a positive reserve for its fund, Brown says it's time to lighten the burden on homebuyers. "Achieving homeown- ership has become more difficult with current FHA mortgage insurance premiums," he said in his letter. By NAR's estimates, FHA fees now make up nearly a quarter of a homeowner's monthly mort- gage payment. On a $150,000 loan with 4.5 per- cent interest, that translates into a total payment of $942, a 13 percent increase over 2008. "In 2014, the mortgage insurance premium of 1.35 percent is 80 basis points higher than the rate of 0.55 percent in 2010," Brown said. "e 80 additional basis points pushed an estimated 1.45 million to 1.65 million renters over a sustainable debt-to-income level for purchase of a home in 2013." Out of those impacted renters, NAR estimates as many as 125,000 to 375,000 would have bought a home last year had they not been priced out of the market. Brown adds that many of today's potential homebuyers who are priced out of FHA loans also cannot afford to use private mortgage insur- ance, which is as high as 1.48 percent annually for a borrower with a lower credit score (620- 679) and a 3-5 percent down payment. Many of these priced-out Americans are young, first-time homebuyers and members of minority groups— two populations FHA works hardest to serve. "Providing access to credit for these homebuyers is a critical means of building wealth," he said. When asked for comment, a spokesperson for HUD responded with the following statement: "FHA is committed to pursuing initiatives that facilitate access to credit in a way that ap- propriately balances the needs and obligations to the Fund. e work on FHA HAWK [Home- owners Armed With Knowledge] and Quality Assurance Framework are two recent examples of initiatives designed to do that. e work on these items continues, and we look forward to sharing additional information on next steps on these in the very near term." WELLS FARGO LOSES BID TO DISMISS FHA LAWSUIT A federal appeals court has rejected an attempt by Wells Fargo to block a govern- ment suit alleging the bank falsely certified the underwriting credit of loans it originated as a direct endorsement lender for the Federal Housing Administration (FHA). In its attempt to have the suit dismissed, Wells Fargo argued the agreement outlined in 2012's National Mortgage Settlement barred the types of claims the government is now making. Wells Fargo was one of five banks participating in the $25 billion settlement with 49 state attorneys general. A three-judge panel disagreed with the bank's argument, reasoning that the govern- ment's suit falls under a different category than the servicing and foreclosure practices covered by the settlement. e latest ruling upholds an earlier decision made by U.S. District Judge Rosemary Collyer last year. A representative for Wells Fargo did not immediately respond to a request for com- ment. Out of the five banks involved in the Na- tional Mortgage Settlement, FHA went on to pursue four, alleging losses in the hundreds of millions of dollars on insured loans due to faulty quality assurance procedures. Bank of America, Citigroup, and JPMorgan Chase went on to settle their cases, leaving only the nation's biggest lender still left. FHA SHARE OF HOME PURCHASE ACTIVITY The FHA is the largest insurer of mortgages in the world. However, its role in the housing market, while still massive, appears to be on the decline. Source: FHA Single-Family Mutual Mortgage Insurance Fund Programs Quarterly Report to Congress FY 2014 Q2 2009 2010 2011 2012 2013 995,102 1,109,163 777,102 733,699 702,417 2009 2010 2011 2012 2013 688 698 700 695 693 2009 2010 2011 2012 2013 $171 B $191 B $134 B $124 B $124 B

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