The Mortgage Bankers Association (MBA) has called on the U.S. Department of Housing and Urban Development (HUD) to cease its moratorium on allowing investors to participate in the department's Section 203(k) rehabilitation loan program.
In a letter to Carol Galante, acting commissioner of the Federal Housing Administration (FHA), the MBA acknowledged that the moratorium was the correct action when it was put in place in the mid-1990s amid allegations of fraud and waste related to the program. However, the trade group stressed that today's housing market is completely different and the investment in the program would benefit the economy.
‘The MBA believes that there would be significant benefits from allowing individual investors to participate in the 203(k) program,’ wrote Steve O'Connor, the MBA's senior vice president of public policy and industry relations. ‘Communities would benefit from investors buying bank-owned properties, renovating them through the 203(k) program and selling or renting them. Investors could help stabilize home prices, reduce vacancies and abandoned properties in neighborhoods, create affordable rental housing and provide job opportunities. Importantly, investors also could contribute to reducing the oversupply of housing, especially in locations where bulk sales are not viable and in inner city neighborhoods.
‘The 203(k) program has a long, proven track record currently with owner-occupant borrowers,’ O'Connor added. ‘The MBA believes that all real estate owned properties should be eligible for the program; however, we would also support a phase-in approach that would begin with only FHA properties being eligible for the program.’