We are participating in the National Association of Home Builders Spring Board Meetings in Washington D.C. Today, we attended a meeting of the Single Family Finance Subcommittee of the Housing Finance Committee. Meg Burns, Director, Office of Single Family Program Development, FHA, was the featured speaker.
Ms. Burns reported that, contrary to some press reports, FHA is in very good financial position and will not be in need of any sort of federal bailout. She did say that a reserve account deficiency (caused by an increase in the FHA book of business) will require a strengthening of borrowing criteria for future FHA business.
This will include:
- Increasing upfront mortgage insurance premiums from 1.75% to 2.25%.
- Increasing downpayment requirements.
- Reducing allowable seller concessions from 6% to 3%.
- Tightening ratio requirements.
Obviously, these changes make it more difficult for creditworthy buyers to purchase new homes. Some of the changes are subject to Federal Register Notice with a comment period. Comments are encouraged. We plan to participate with our comments through NAHB.
Builders from around the country complained of overly conservative appraisals for both FHA and conventional lending. Builders were encouraged to participate in an appraisal dispute process with underwriters where appraisers have failed to recognize fair comps.
Builders in attendance were generally very pessimistic about conditions in their markets. By comparison, we in West Texas feel very fortunate to be in the market we are serving. We are indeed in a strong market where inventories are low and home values have remained stable.