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Realtors Support HAWK, Say It Could Go Further

The National Association of Realtors (NAR) lent its support Monday to the Homeowners Armed with Knowledge (HAWK) pilot program but has concerns that it will not do enough to lower insurance premiums for homebuyers.

In a letter sent to HUD, the organization reiterated its appreciation for the Federal Housing Administration's (FHA) efforts to provide reduced mortgage insurance premiums to first-time homebuyers but complained about the high mortgage insurance premiums and counseling fees that come along.

The HAWK Pilot Program for new homebuyers provides FHA insurance pricing incentives to first-time homebuyers who participate in housing counseling that covers how to evaluate housing affordability and mortgage alternatives, financial advice, and the rights and responsibilities of home ownership.

FHA announced the program in May as part of its "Blueprint for Access," outlining additional steps that the agency is taking to expand access to credit for underserved potential borrowers.

Under the program, first-time homebuyers who participate in the four-year pilot program will benefit at closing from a 50 basis points reduction in the upfront mortgage insurance premium and a 10 basis points reduction in the annual premium.  If buyers complete post-closing housing counseling and do not have delinquencies greater than 90 days in the first 18 months after closing, they will receive an additional 15 basis points reduction on the annual premium starting the loan's 25th month.

NAR contends that, despite the counseling incentive, FHA insurance rates are too high.

"As the leading advocate for homeowners, Realtors are concerned about FHA's high annual mortgage insurance premiums and the insurance requirement for the life of the loan," NAR President Steve Brown said. "FHA fees make up nearly 20 percent of a monthly mortgage payment today and are making it more difficult for qualified buyers to purchase a home. Since FHA is on target to meet and exceed its capital reserve requirements in the next fiscal year, we encourage FHA to support premium reductions across the board."

The letter also voiced concern that the cost of the counseling envisioned under the program, a combined total of $500 if all counseling sessions are attended, is too high and would prevent many qualified first time homebuyers from accessing the market. NAR recommended that lenders be allowed to mitigate some of the counseling costs. Otherwise, it could take buyers two years to offset the cost of counseling with the premium reductions offered under the HAWK program and even longer if buyers have to satisfy other financial programs separately.

FHA contends that HAWK will save the average buyer approximately $325 a year—or almost $9,800 over the life of their loan.

About Author: Derek Templeton

Derek Templeton is an attorney based in Dallas, Texas. He practices in the areas of real estate, financial services, and general corporate transactional law. His experience includes time as an Attorney Adviser for the U.S. Small Business Administration and as General Counsel for a nonprofit organization in Dallas. A self-avowed "policy junkie," he has a keen interest in the effect that evolving federal policy has on the mortgage, default servicing, and greater housing industries.

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