HUD Extends Counseling, Discount to Homebuyers in New Pilot Program

The Federal Housing Administration (FHA) announced today a new pilot program that will allow the average homebuyer to qualify for savings of about $325 a year – or almost $9,800 over the life of an average loan by completing mandatory HUD-approved housing counseling.

The FHA’s “Blueprint for Access” pilot program, announced Tuesday, outlines the steps the FHA will take over the next few months to expand access to credit for underserved borrowers.

The new program will also further incorporate housing counseling into the home buying process for borrowers using FHA-insured financing through the the Homeowners Armed with Knowledge (HAWK) pilot program, to be launched in fall of this year. HUD will publish a notice in the Federal Register for the HAWK program this week.

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Under the four-year HAWK for New Homebuyers pilot program notice, homebuyers who commit to housing counseling will qualify for savings on their FHA-insured loans. FHA proposes that homeowners who complete 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.

After two years with no serious delinquencies, participants receive an additional 15 basis point reduction in annual MIP. The combined savings will amount to nearly $10,000 over the course of the loan, FHA projects.

Research shows a strong correlation between housing counseling and mortgage performance, according to program documents.

Delinquency rates for borrowers who have received counseling are 29% lower for first-time homebuyers and 15% lower overall, the data show.

The program is expected to have a positive impact on the overall market, said Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development.

“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,” Donovan said in a news release. “We want lenders to be able focus on the quality of their processes and lend to all qualified borrowers.”

Written by Cassandra Dowell

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