FHA Announces Housing Counseling Pilot Program
On May 15, the Federal Housing Administration (FHA) published a notice in the Federal Register detailing the Homeowners Armed with Knowledge (HAWK) for New Homebuyers pilot program. This program is part of FHA’s larger "Blueprint for Access" program, aimed at increasing underserved borrowers’ access to mortgage credit.
Through HAWK, which was originally introduced in President Obama’s proposed Budget for FY 2015, HUD will implement a four-year, two-phase housing counseling pilot program that will provide FHA insurance pricing incentives to new home buyers who complete housing counseling and education courses during and after the home-buying process. HUD is proposing that borrowers who complete the pre-contract and pre-closing counseling and education will receive a one-time 50 basis points reduction in the upfront mortgage insurance premium (MIP) and a permanent reduction of 10 basis points on the annual MIP. If the homebuyer completes post-closing counseling and does not fall into serious delinquency on the loan for the first two years, they will receive an additional reduction of 15 basis points on the annual MIP. According to HUD, this amounts to an average savings of almost $9,800 over the life of the loan.
The goals of the program are to improve loan performance and reduce claims paid by FHA’s Mutual Mortgage Insurance Fund (MMIF), improve family budgeting skills of FHA borrowers, and increase access to sustainable homeownership. In the notice, FHA notes that research has shown that a correlation exists between counseling for first-time home buyers and reductions in serious delinquencies. The number of serious delinquencies can decline by up to 30 percent among first-time home buyers that have completed counseling courses, and lenders and investors can save up to $1,000 for every borrower that receives counseling before purchasing a home.
In the first phase of the pilot, the program will be open only to a small number of borrowers working with HUD-selected, FHA-approved lenders, servicers, and housing counseling agencies. In the second phase, participation will be open to all first-time home buyers using FHA-insured financing, up to a capped number of loans for each of the four years of the pilot program. All FHA-approved mortgagees and servicers and HUD-approved counseling agencies will be eligible to participate in the second phase.
Comments on the proposed pilot program are due to HUD by July 14. NCSHA may submit comments on behalf of its members, so please send NCSHA’s Greg Zagorski your thoughts on whether NCSHA should submit comments and what issues and recommendations you would like our comment to include.