Speaking at this year’s Bipartisan Policy Center’s Housing Summit on Sept. 16, 2014, the U.S. Department of Housing and Urban Development (HUD) Secretary Julian Castro addressed the need to loosen strict mortgage requirements to make home ownership a reality for more Americans and continue economic progress.
“A few years ago, bad loans and risky secondary market products prompted a housing crisis,” Castro said. “Some believe it was too easy to get a home loan. Today it’s too hard.”
Announcing a two-step plan in coordination with the Federal Housing Administration (FHA), Castro said the government aims to give more Americans the ability to own a home. With average credit scores in the mid-700s necessary for today's mortgage loans, according to the Urban Institute, more than 13 million people with credit scores between 580 and 680 have difficulty gaining mortgage financing.
“The pendulum has swung too far in the other direction," Castro said. “The truth is that the dream of home ownership is out of reach for too many Americans. This has to change.”
HUD’s plan includes allowing FHA borrowers to get reduced mortgage insurance by undergoing housing counseling in a program called HAWK – Homeowners Armed With Knowledge.
Castro also addressed concerns from traditional lenders regarding the risk involved with FHA business.
“We’ve committed to helping lenders better identify loan defects and determine how serious those defects are,” he said.
To help with these issues, HUD will overhaul their “Single Family Handbook,” which will bring together 900 mortgagee letters and other policy guidance into a single document. They plan to publish the first section on loan origination through endorsement by the end of September 2014.
“This is a win for the industry. This is a win for FHA. And, most importantly, it’s a win for the American people,” Castro said.