WASHINGTON (8/27/14)--U.S. Housing and Urban Development (HUD) Secretary Julian Castro addressed ways to balance serving homebuyers while managing risk for the Federal Housing Administration (FHA). Castro, who officially took office at the end of July, spoke during a National Association of Realtors webinar Tuesday.
Castro provided insight into the FHA's Homeowners Armed With Knowledge (HAWK) program. HAWK is a pilot program meant to help borrowers make better choices when it comes to housing finance.
The four-year voluntary program offers mortgage insurance premium reductions to first-time homebuyers with an FHA loan, in return for completing three phases of housing counseling.
At the invitation of HUD and FHA, Credit Union National Association regulatory advocacy staff has attended advance briefings on the HAWK program, as well as other housing finance reform measures, in recent months.
To receive the maximum benefit, a borrower must complete three phases of counseling--pre-purchase, pre-closing and post-closing--and have two years of timely mortgage payments. In exchange, the borrower can see a premium reduction, both up front and on annual premiums.
"At the end of the day, a borrower with an average size loan, say $180,000, will see $10,000 in savings over the life of the loan," Castro said. "By incentivizing responsible decision making we're trying to build a stronger foundation for middle class home ownership and at the same time reduce the exposure to risk by the FHA, while creating a more stable housing market."
The HAWK program falls under the FHA's renewed interest in housing counseling, which is part of the agency's overall ramping up of quality assurance measures. Castro mentioned a few other measures, designed to create more certainty and clarity for FHA lending partners.