“With legislation pending in Congress, this study provides relevant and timely information to MBA members and policymakers regarding the FHA program,” said Doug Duncan, MBA chief economist and senior vice president of research and business development.  “Lenders see value in FHA but there are barriers that FHA needs to overcome to allow it to provide additional options for borrowers and to be more user friendly for lenders.”

Key findings from the study include:

• Over two-thirds of lenders believed that FHA’s lack of product offerings was a major factor underlying its declining market share. 
• Almost 70 percent of lenders reported that the addition of a zero-down payment product to FHA’s product line would result in a “significant” or “major” increase in the number of FHA loans that they originate.
• One-third of lenders believed that an expanded product line would lead to a “significant” or “major” increase in their FHA volume.   
• 46 percent of lenders believed that a stronger cash-out refinance program would make FHA programs significantly more competitive, particularly in the current interest rate environment. 
• 62 percent of lenders identified the closing and post-closing process of FHA loans as a “significant” or “major” contributor to higher origination costs of FHA loans. 

Survey results also suggest that there is a consistent interest in FHA lending and that there are numerous opportunities to improve FHA program offerings. 

Since the survey was administered, the U.S. House of Representatives passed H.R. 5121, Expanding American Homeownership Act of 2006, legislation which empowers and revitalizes the Federal Housing Administration (FHA).  Additionally, the FHA has made a number of enhancements to its programs and processes.  The HUD-92564-VC form, commonly known as the “VC Sheet” which appraisers were required to complete while reviewing a property’s condition, has been retired.  Additionally, HUD’s recently announced Lender Insurance program and new appraisal protocols are expected to address the cumbersome workload in the closing and post-closing process of FHA loans.  In fact, 61 percent of lenders said that they would participate in the program and 87 percent were planning to participate anticipated a decline in the average cost of FHA loan originations. 

“The retirement of the VC Sheet and announcement of the Lender Insurance program are steps in the right direction for FHA,” said Duncan.  ”Other issues that have been uncovered in this survey would require congressional action for changes to be made and MBA plans to support such action.”   

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About the Research Institute for Housing America:
The Research Institute for Housing America of the Mortgage Bankers Association is a 501(c)(3) trust fund. Its chief purpose is to encourage and aid - through grants and sponsored research to distinguished scholars, educational institutions, research facilities, and government organizations - the pursuit of knowledge of mortgage markets and real estate finance. Its mission emphasizes rigorous analysis furthering understanding of how to expand rental opportunities and home ownership among the underserved, and how to encourage equal access to mortgage credit for all qualified borrowers. For additional information, visit: http://www.housingamerica.org/index.htm.

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The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 370,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,400 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA's Web site:  www.mortgagebankers.org.