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Homeowners Need a Safer Alternative to Risky Mortgages |
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WASHINGTON - Concerned that high-priced, high-risk mortgages are hurting low- to moderate-income borrowers, Assistant Secretary for Housing - Federal Housing Commissioner Brian Montgomery today reaffirmed the need to modernize the Federal Housing Administration (FHA) and give homeowners a better alternative to exotic high-cost mortgages. According to 2004 HMDA (Home Mortgage Disclosure Act) Data 40 percent of African Americans and 23 percent of Hispanics pay an interest rate three percent higher than the market rate. The Center for Responsible Lending reports that 51 percent of refinancing transitions in African American neighborhoods are sub-prime loans. "There needs to be a mortgage alternative which will qualify a wide swath of borrowers and simultaneously provide them with the loan options they require...enter a modernized and reinvigorated FHA. Everyone should have access to a safe, affordable mortgage product; and this should not change just because that person is a first-time homebuyer, a minority homebuyer, or a homebuyer with troubled credit history," added Montgomery. Modernization legislation, which overwhelmingly passed the House last year, would replace the FHA's stringent three percent minimum cash investment requirement with a flexible plan that allows homeowners to put down almost no money down, one, two or even ten percent. Today, few buyers of homes in California or much of the Northeast have been able to use FHA financing because FHA's loan limits aren't high enough to meet the cost of most homes in those regions.
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