July, 2007
Washington Watch
Inspection News and Views from the American Society of Home Inspectors

HUD/FHA Modernization Bill Clears Committee, Headed for Floor Action


(Washington, D.C.) – In early May, the House Committee on Financial Services reported out HR1852, the Expanding American Homeownership Act of 2007. The bill addresses a prime concern among housing stakeholders that HUD/FHA have fallen behind the private sector lending market. HR1852 would modernize HUD/FHA and, it is hoped, help facilitate more home sales using FHA financing.

More home sales will likely mean more home inspection opportunities.  

The bill is now on the House calendar awaiting floor action.

In direct meetings with ASHI, HUD staff members mentioned that the HUD leadership and the White House have become increasingly concerned that HUD might become anachronistic due to the rapid developments in the private-sector lending market. This is of concern to ASHI because HUD provides not only substantial funding to facilitate home sales, but also serves as a clearinghouse on home-buying information. And it is a mouthpiece for the federal government policy on issues such as home inspection. HUD’s pro-home inspection message is invaluable, not only for the substantive message it conveys, but also for the fact that it comes from an unbiased and authoritative third-party source.

As reported by the Congressional Research Service, HR1852 would: 1) modify requirements governing the maximum principal loan obligation; 2) extend the mortgage term; 3) revise requirements for cash down payment by the mortgagor in the eligibility criteria for mortgage insurance, including mortgage insurance premiums for zero- and lower-down payment borrowers who obtain a mortgage secured by a one- to four-family dwelling; 4) establish underwriting standards for higher-risk mortgages; 5) provide for flexible premium- rate variations according to the credit risk associated with the type of mortgage product being insured; 6) revise multifamily housing mortgage limits in high-cost areas; and 7) authorize HUD to enter into agreements to insure up to 100 percent of certain mortgages for a single-family residence located in a major disaster area — among other major provisions.

The modernization bill may have several impacts of specific interest to ASHI members. FHA documents include the “For Your Protection – Get a Home Inspection” information sheet that ASHI has worked successfully with HUD to improve and distribute more widely. Any modernization effort to expand use of HUD/FHA financing will expand dissemination of the improved home inspection message from the federal
government. Further, it would establish certain borrower protections, including mortgagee disclosures and mortgagor counseling, as mandatory for higher-risk mortgages. ASHI is working with HUD and Capitol Hill to expand the use of mortgage counseling, and more specifically, require counseling on the importance of home inspections. ASHI has drafted such language for use in a housing counseling bill and has offered it to Housing Subcommittee staff in the House.

ASHI is constantly lobbying policy-makers in Washington, D.C., that promoting professional, independent home inspections is one of the strongest consumer protection stances that they can endorse. As an extension of this theme, ASHI is currently drafting language for use by Members of Congress in advising their constituents on the importance of home inspections. The information will be used by members in their mailings to their constituents, potentially reaching up to 500,000 people per congressional office. There will be more to report on this effort in the future.