An official of
the Mortgage Bankers Association warned last week that the
Federal Housing Administration could eventually be forced out of
the mortgage insurance business if it doesn't modernize, and
keep up with the competition.
Robbins, who is in line to become MBA chairman in 2007, said the
FHA is instrumental in providing financing for immigrant and
minority home buyers, backing more loans to these so-called
"underserved" borrowers than Fannie Mae and Freddie Mac
But he told
the Midwinter Housing Conference in Park City, Utah, that the
agency has become "very difficult to do business with," and
could wind up being a chapter in the housing history books if it
doesn't keep up with the times.
Mozilo, chairman of Countrywide Financial Corp., Calabasas,
Calif., went further, saying the FHA is already on the verge of
being unnecessary. The agency "is making itself irrelevant by
forcing Fannie Mae and Freddie Mac to take a lot of their
product," the outspoken former MBA president said.
Robbins, who is chairman of the American Mortgage Network, said
that with the growing dominance of minority households, which
tend to face serious affordability problems, the need for
government-insured mortgages is more important than ever.
to projections by the Harvard Joint Center for Housing Studies,
minorities will be responsible for two-thirds of the growth in
total households over the ten-year period between 2000 and 2010.
80-year-old FHA already is key to the housing aspirations of
minorities, according to the MBA's figures. Although its share
of the mortgage market is only 3 percent, a third of its
originations are to minorities vs. 18 percent for the
addition, the agency makes the same number of loans to
minorities as the GSEs together. And it is responsible for half
of all loans to borrowers who earn less than $50,000 a year.
William Hudson of Brownsville, Texas, said government-insured
financing is critical to his buyers, 90 percent of whom are
low-income Hispanics. Without the FHA, he said, they'd be forced
to pay higher rates in the subprime sector, or be forced out of
the market altogether.
Robbins pointed out that the agency is being "adversely
selected" by originators, with the better loans going to private
insurers and the FHA getting what's left.
(the FHA) is not getting enough high quality loans to balance
out the greater risk, it ultimately could be forced out of
business" unless it shapes up, the future MBA president said.
The FHA has
to "keep pace" with the rest of the mortgage market by investing
in technology and human resources, and by becoming more
innovative in terms of loan products, the industry spokesman
told the conference.
"can be an incredibly important part of the housing finance
system in the future," said Mr. Robbins, who placed the FHA
reform at the top of MBA's list of key issues.
them to be here, but they have to keep pace with the rest of the
market to remain viable."