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46 FHA ACTING COMMISSIONER EXPRESSES DISAPPOINTMENT IN SPENDING BILL A $1.1 trillion congressional spending bill recently signed by the president may avoid another government shutdown, but Biniam Gebre, acting commissioner of the Federal Housing Administration (FHA), is disappointed that certain FHA programs were not included in that spending plan. e plan omitted FHA's proposed lender fee and the agency's Homeowners Armed with Knowledge (HAWK) program, which were created as part of an ongoing effort by the agency to expand credit access and move the economy toward recovery. "We are deeply disappointed programs that could have served millions of families will not be permitted under the bill," Gebre said. "In today's difficult economic times, we know Congress has to make tough choices, yet the decision to not support FHA's administrative fee for lenders and preventing implementation of HAWK program that could have saved borrowers thousands of dollars stands in contrast to the rhetoric of wanting to support America's hard-working families." According to FHA, the proposed lender fee would have clarified the rules for lenders, thus giving them more confidence to loan to more FHA-eligible borrowers, at a cost of about $40 for every $10,000 over the life of the loan. FHA would have been able to use more up-to-date technology in order to compete more effectively in an environment in which financing and risk management are constantly becoming more complex. Under the HAWK program, homeowners who attend housing counseling would be eligible for tangible savings on their FHA-insured loans, totaling an average of about $9,800 over the life of the loan. FHA proposed reductions of 50 basis points in the upfront mortgage insurance premium (MIP) and 10 basis points in the annual MIP for homeowners who either complete housing counseling or sign a contract committing them to housing counseling prior to closing on the house. Homeowners who participate in post-closing counseling and accumulate a record of two years with no serious delinquencies on payments can receive an additional reduction of 15 basis points from the annual MIP. e HAWK program, according to FHA, is "a strong step toward integrating housing counseling into the home buying process and ensuring broad access to housing counseling services." Gebre believes that the housing market will suffer as a result of congress excluding the HAWK program from its recently proposed spending plan. "is decision means that many families will continue to be locked out of the mortgage market, unable to buy a home or build wealth that often results from homeownership," Gebre said. MASSACHUSETTS AG URGES FHFA TO MAKE MORE CHANGES TO BUYBACK POLICY e Federal Housing Finance Agency (FHFA) recently changed its policy regarding buyback of REO properties through Fannie Mae and Freddie Mac, but Massachusetts Attorney General Martha Coakley thinks the agency could do more. Coakley sued the GSEs in June of 2014, claiming their refusal to engage in foreclosure buyback programs was a violation of Massachu- setts' foreclosure prevention law. e suit was dismissed. and Coakley is considering making an appeal; however, many viewed the recent FHFA policy changes as a partial victory for Coakley. In a letter to FHFA Director, Mel Watt, Coakley praised the changes announced by the agency that went into effect in late November allowing a former homeowner, or a third party representing that homeowner, to buy back his or her house following a foreclosure at fair market value instead of the entire amount on the mortgage. But Coakley also spelled out three ways in which she thought the agency could further improve its buyback policy. "We are pleased that FHFA now has agreed to reverse, in part, its position regard- ing buyback programs that were a major component of our lawsuit. We are considering this development as we weigh our options for appeal in that case," Coakley wrote in her let- ter. "Because of this policy change, numerous families in Massachusetts will no longer face eviction at the hands of the GSEs, but will instead be able to repurchase their homes at the market rate. is policy change also makes financial sense for the GSEs, as they will recoup at least the property's current market value, yet they will avoid the cost of owning, maintaining, and marketing these REO prop- erties, as well as the cost incurred by suing to evict families from their former homes. By any measure, this is an outcome that benefits all stakeholders: the GSEs, the affected families, and the communities in which they live. As encouraged as we are by this policy change, we believe it does not go far enough." First, Coakley said the policy should cover a larger inventory of houses. e changes an- nounced applied only to the GSEs' existing inventory (as of November 25, 2014) of single- family REO properties, which currently totals about 121,000. e policy change does not apply to homes on which the foreclosure process began after November 25, 2014. Second, Coakley encouraged the FHFA to include pre-foreclosure sales, or short sales (sales in which the buyer pays less than the outstand- ing mortgage balance for the home), in its buyback policy. "ere is no principled reason to limit the new policy to sales of REO properties," Coakley wrote. "Instead, the opposite is true: in a short sale, the GSEs avoid the cost of foreclosure alto- gether, which is also an enormous benefit to the homeowner and surrounding community." ird, Coakley urged the FHFA in her letter to reevaluate its policies on principal reductions to mortgage loans, saying that this could be used as an effective anti-foreclosure tool. "A loan that is modified such that the borrower can afford to stay in the home and continue paying the modified loan is gener- ally more financially advantageous for lenders and investors when compared to foreclosure," Coakley wrote. "As such, the adoption of principal reduction represents a financial benefit to the GSEs, while also stabilizing families and neighborhoods." Under the HAWK program, homeowners who attend housing counseling would be eligible for tangible savings on their FHA- insured loans.

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