Rules and Regulations. Request for information

Agency: Office of the Assistant Secretary for Housing—Federal Housing Commissioner, Department of Housing and Urban Development, HUD
Action: Request for information
Citation: FR Doc. 2022-21047 · Docket No. FR-6342-N-01

Summary

In its 2022-2026 Strategic Plan, the Department established strategic goals to “Support Underserved Communities” and to “Promote Homeownership.” Among the goal of supporting underserved communities is to advance housing justice and proactively strengthen and protect vulnerable and underserved communities. Through this Request for Information (RFI), the Federal Housing Administration (FHA) seeks public input regarding barriers to the origination of small mortgages in the FHA program. Information provided in response to this RFI will allow FHA to identify barriers to the origination of small mortgages in the FHA program and consider the development of policies and programs that better support and expand affordable homeownership opportunities in underserved markets with lower housing prices.

Dates

Comments are requested on or before December 5, 2022. Late-filed comments will be considered to the extent practicable.

Supplementary Information

I. Background HUD's 2022-2026 Strategic Plan, 1 released in March 2022, established strategic goals to “Support Underserved Communities” and to “Promote Homeownership.” Among the objectives of supporting underserved communities is to “Advance Housing Justice,” which includes expanding the Department's role in proactively strengthening and protecting vulnerable and underserved communities. Borrowers often experience difficulty finding affordable options to finance the purchase or refinance of properties below certain price thresholds, especially in areas where home values are low. FHA's mission is to provide mortgage financing options for low- to moderate-income borrowers who are not well served by the private mortgage market, including those seeking small mortgage. HUD understands that a primary barrier to small mortgage lending is the costs to originate and service small mortgages in relation to the limited potential compensation afforded by these loans. Therefore, lenders do not find it economically feasible to originate mortgages with low principal balances. This lack of financing availability for mortgages with low principal balances creates a significant barrier to affordable homeownership for underserved households, particularly in certain geographic areas. 1 U.S. Dept of Housing and Urban Development, Fiscal Year 2022-2026 Strategic Plan (2022), available at https://www.hud.gov/sites/dfiles/CFO/documents/FY2022-2026HUDStrategicPlan.pdf. Under Title II of the National Housing Act (NHA), 2 FHA insures loans made by FHA-approved mortgagees for the purchase or refinance of 1-4 family residences, including individual condominium units and manufactured homes classified as real estate. FHA insures mortgages to increase the availability of affordable home financing options for low- and moderate-income borrowers by protecting mortgagees and lenders against the risk of default. 2 12 U.S.C. 1707 et seq. The Title II program provides limits on the maximum loan amounts but does not contain limitations on a minimum loan amount. Additionally, FHA's regulation at 24 CFR 203.18d prohibits lenders from establishing a minimum principal loan amount under FHA's Title II program. The House of Representatives Committee Report, 116-452, accompanying the U.S. Departments of Transportation, Housing and Urban Development, and Related Agencies Appropriations Bill, 2021 3 directed HUD to submit a review of its FHA single-family mortgage insurance policies, practices, and products to identify any barriers or impediments to supporting, facilitating, and making available mortgage insurance for mortgages having an original principal obligation of $70,000 or less. In response, HUD is issuing a report concurrently with this RFI that outlines FHA's role in the small mortgage lending market and identifies certain potential impediments to small mortgage lending. 3 Available at https://www.congress.gov/congressional-report/116th-congress/house-report/452. II. Purpose of this Request for Information The purpose of this RFI is to solicit information regarding barriers to originating small mortgage lending in the FHA program and obtain feedback on ways to improve FHA policies and programs that support affordable homeownership opportunities in underserved markets with lower housing prices. III. Specific Information Requested While FHA welcomes all comments relevant to expanding small mortgage lending in the FHA mortgage insurance program, FHA is particularly interested in receiving input from interested parties on the questions outlined below. 1. Communities have reported a lack of available financing for small balance mortgage loans in some areas. Have you observed this to be true and is there a particular mortgage loan amount below which the problem is most acute? 2. What housing supply market conditions and purchasing characteristics affect the availability of and demand for small mortgages? 3. What information can you provide regarding the ways in which the FHA program serves or does not serve borrowers seeking small mortgages? 4. What barriers ( e.g., origination and servicing costs, compensation, disincentives) exist for mortgage lenders and other industry participants in facilitating transactions that include the origination or servicing of small mortgages in the FHA program? 5. What technology solutions could improve the availability of small mortgages in the FHA program? 6. What changes to policies, regulations, features, or processes of the current FHA program would encourage mortgagees to do more lending for small mortgages in the FHA program? 7. What policies, regulations, features, or processes outside of FHA/HUD impact the availability of small mortgages in the FHA program? 8. What, if any, state and local requirements affect the availability of small mortgages in the FHA program? 9. What consumer protections are unique to small mortgages that should be considered in the FHA program? 10. What issues should be considered relating to provision of liquidity for small mortgage lending through securitization? 11. Offer any additional comments on the role that FHA programs could play in improving the supply of small mortgages. Julia R. Gordon, Assistant Secretary for Housing—Federal Housing Commissioner. [FR Doc. 2022-21047 Filed 10-3-22; 8:45 am]