HUD Aims to Improve National Homeownership Rate

In his first major speech since taking over as secretary for the U.S. Department of Housing and Urban Development, Julian Castro made a bold pledge.

The former mayor of San Antonio vowed to improve the national home ownership rate—a task he hopes to accomplish by first working with lenders and mortgage brokers to bring affordable home loans to a wider range of Americans. Bloomberg reported Castro, speaking to a gathering at the Bipartisan Policy Center in Washington D.C., focused on shifting HUD priorities. With the national foreclosure rate improved and the majority of homeowners back above the waterline on their mortgages, the goal now is to reevaluate tight post-recession credit standards and try to get more new buyers into homes.

Specifically, Castro referenced plans to work with the Federal Housing Administration and make adjustments to handbook passages regarding lender responsibility for defaulted loans. The agency is currently seeking public feedback on its proposed changes to the mortgage-defect identification system. Castro did not mention any specific plans to reverse FHA fees for mortgage insurance on loans with down payments as low as 3.5 percent, choosing instead to emphasize HUD's desire to work with mortgage creditors.

"It's time to remove the stigma associated with promoting home ownership," Castro told the forum. "When done responsibly, it strengthens communities and boosts our economy."

Many industry members contend the FHA fee increases have jacked up costs for borrowers, with the National Association of Realtors estimating the total costs have amounted to more than $100 per month since 2008. Castro also noted HUD has plans to expand consumer education programs, including those geared toward first-time home buyers, while refocusing on employment services for residents of public housing. HUD currently oversees all federally subsidized housing, and while home retention rates have improved across all income groups, lending rates fell to a new 17-year low earlier this year.

Talk of Minimizing the GSE Role 

According to National Mortgage Professional Magazine, part of HUD's plan could be to further privatize the industry, as older public housing units fall victim to disrepair and renting becomes more expensive. Whether by reducing the footprint of government-sponsored enterprises Fannie Mae and Freddie Mac—which currently remain under FHA conservatorship—or generating new forms of private capital, the hope is to reinforce the notion of homeownership as a sound investment. As property values have risen over the past couple of years and average wages have stagnated, concerns about the next generation of homebuyers have escalated. Castro assured the forum many younger renters "are ready to own," but too many are being boxed out by strict standards for mortgage credit approval. He further emphasized that housing finance reform is necessary, as the current level government influence on the market is not sustainable.

"Secretary Castro, in his first major policy speech since taking over HUD, has reinforced the agency's desire to strengthen communities and achieve a healthy housing market," said David Stevens, president of the Mortgage Bankers Association, in a statement released after Castro's speech. "We welcome his invitation to work together and completely agree that we should be looking for ways to attract private capital back into the market, establish certainty for lenders and protect taxpayers for the future. We appreciate the work FHA has put into loan quality assessment technology. This is an important first step toward providing greater clarity to FHA lenders and we look forward to working with FHA to further this important process."

Castro mentioned revitalizing urban neighborhoods as a staple of improving national homeownership, noting the impact city economies have on the areas surrounding them. Multiple industry groups lauded the secretary's speech, though specific plans for expanding credit access have yet to be publicized.