The Federal Housing Administration (FHA) has launched a new incentive program that gives borrowers ‘tangible savings’ on FHA-insured home loans when they complete housing counseling before and after closing.
The Homeowners Armed with Knowledge (HAWK) pilot program aims to further incorporate housing counseling into the home buying process for borrowers using FHA insured financing. The FHA proposes that homeowners who complete U.S. Department of Housing and Urban Development (HUD)-approved housing counseling before signing a contract to purchase a home and who complete additional pre-closing housing counseling will receive a 50 basis point reduction in the upfront FHA mortgage insurance premium (MIP) and a 10 basis point reduction in the annual FHA MIP.
That equates to approximately $325 a year – or almost $9,800 over the life of their loan, the FHA claims in a press release.
The counseling is provided through independent nonprofit organizations that give borrowers the tools they need to understand the rights and responsibilities of homeownership.
But wait, there's more. Borrowers who participate in post-closing counseling and who have a track record of timely mortgage payments over the first two years will receive an additional 15 basis point reduction in annual MIP.
The HAWK program is being offered as part of the FHA's ‘Blueprint for Access’ initiative, which aims to expand access to credit for underserved borrowers. In addition, as part of the program FHA is seeking to improve its quality assurance efforts. As such, HUD has released more information on the FHA's Quality Assurance Initiative, intended to provide greater clarity and transparency to FHA-approved lenders to encourage lending to qualified borrowers across the credit spectrum.
‘This is a win for families, FHA, lenders, Realtors and the overall market, which is why we are very excited about its potential impact,’ says Shaun Donovan, secretary of HUD, in the release. ‘We want to create an environment that encourages responsible behavior and provides clear rules of the road so lenders can originate loans without fear of unanticipated consequences. We want lenders to be able focus on the quality of their processes and lend to all qualified borrowers.’
‘FHA's mission is to make sure that there is access to affordable mortgage credit for underserved borrowers and communities,’ adds Carol Galante, commissioner of the FHA. ‘Our blueprint to expand credit access outlines the steps we are taking over the next few months to make that happen. These programs transform the way we do business, make us a better partner and help reduce risk across the market.’
To learn more about the Blueprint for Access program, click here.