The Federal Housing Administration has played a fundamental role in helping stabilize the nation’s housing market; however, FHA reform is critical for keeping the housing and economic recovery on the right track.  

That’s according to David H. Stevens, assistant secretary of the U.S. Department of Housing and Urban Development and Federal Housing Administration commissioner, in an address to several thousand Realtors® gathered for a conference in Washington, D.C.

Stevens credited increased home buyer demand, brought about by the home buyer tax credits, and the federal government’s purchase of mortgage-backed securities for helping restore consumer confidence and getting the economy moving.

“Home prices and sales are beginning to recover, inventories are down, private capital is beginning to re-emerge, investor confidence is coming back, and the job market is showing signs of improvement.

These all show renewed confidence in the housing market. We need to finish the job now and make the housing recovery sustainable and keep the economy on the right track,” Stevens said.

Despite the signs of improving stability, the housing market continues to face challenges, mainly from unemployment and homeowners with negative equity, Stevens said.

“These issues need to be dealt with responsibly, we need solutions to help the most severely distressed homeowners — those most in need and at risk — and when we can’t help them, we need to make the transition as smooth as possible,” he said.  

According to Stevens, helping underwater borrowers is critical to stemming the tide of foreclosures. Recently announced revisions to FHA and the Home Affordable Modification Program will help stabilize home prices and keep more people in their homes.

FHA refinances will help homeowners write down principal balances or modify and restructure loans into safer, sustainable products. The HAMP program changes include temporary assistance for unemployed homeowners while they look for work.

FHA continues to play a pivotal role in housing recovery, Stevens said, as he reemphasized that reform is critical. “After the housing market crashed, FHA had to step in to play a vital role. Over the past three years, FHA reacted by increasing its market share dramatically. There would be no housing market recovery without FHA; however, the program is at risk. We cannot continue to operate under the current construct if we don’t shore up its fiscal situation. We need to make FHA stronger,” said Stevens.

Stevens urged support for H.R. 5072, the “FHA Reform Act of 2010,” which would allow FHA to hold lenders accountable for the loans they underwrite and originate. The bill would also  give FHA the flexibility to respond to changes in the marketplace by granting additional authority to adjust the annual mortgage insurance premium, and reduce borrowers’ upfront mortgage insurance premiums.

“Adopting these changes during the current fiscal year would replenish FHA’s capital reserves and strengthen its financial position,” said Stevens.