WASHINGTON — Dr. Ben Carson, the 17th secretary of the U.S. Department of Housing and Urban Development (HUD) made a brief visit to the National Association of Realtors midyear conference today, where he was greeted with a standing ovation.
He offered attendees of the Regulatory Issues Forum at the Realtors Legislative Meetings and Trade Expo his thoughts on homeownership, the Federal Housing Administration’s condo rule, mortgage insurance premiums, energy efficiency loans and public-private partnerships.
“[Homeownership] serves as the foundation of wealth for most American families. We need to make sure that everybody has a chance to become a homeowner,” Carson said.
He noted that last year, 1.25 million American families were able to close on homes with the help of FHA loans — a more than 60 percent increase from 2014.
But not everyone should take on homeownership, according to Carson.
“Yes, we all want everybody to be in a home and to own a home, but we’re also learning that to put someone in a home who can’t afford it is not a nice thing to do because they not only lose the home, but also their future potential,” he said.
The FHA condo rule
Carson recognized condominiums as the “first entry to homeownership” for many and said HUD is working to finalize a rule proposed in September.
The rule would bring back “spot” approvals of single-family units within unapproved condo developments under certain circumstances and stretch condo projects’ approval status by requiring recertification every three years instead of the current two.
The return of spot loans could be a boon to both buyers and sellers of those single-family units. Under current rules, without FHA certification of a condo project as a whole, no unit is eligible for an FHA mortgage.
“Right now FHA is looking through the process of looking at all the comments that have been received through the proposed rule,” Carson told NAR President Bill Brown on stage.
“I can assure you that this rule has very high priority and we’re excited to implement it.”
Brown expressed concern in regards to the FHA’s treatment of Property Assessed Clean Energy (PACE) loans, which homeowners can obtain to make improvements to their home’s energy efficiency.
In July 2016, the FHA issued new guidance stating that PACE loans will remain in a subordinated position on most FHA mortgages but that PACE loans will retain a first-lien position for delinquent PACE obligations or foreclosed properties.
While NAR supports energy efficiency, having PACE loans retain that first-lien position will increase uncertainty in the mortgage markets, according to Brown.
Carson agreed. “I’m concerned about it because it really does create a burden and an extra complication, so we’re very carefully studying that and we are very, very amenable to adjusting that policy,” he said.
“Good,” Brown said. “We have a lot of things that we can work on together because our goals are the same.”
The FHA mortgage insurance premium reduction
But Carson wasn’t entirely amenable to all of the changes Brown proposed on NAR’s behalf.
In January, 11 days after FHA announced its plan to reduce mortgage insurance premiums by a quarter of a percentage point, and an hour after President Donald Trump was sworn in, HUD announced in a letter that the cuts were “suspended indefinitely.”
When Brown asked if HUD will review the premium reduction, noting that it would have helped 30,000 to 40,000 people achieve homeownership, Carson said HUD would.
But he stressed that the agency wanted to “protect taxpayers” and that a previous premium reduction had resulted in the FHA needing a $1.7 billion bailout.
“We’ll keep the rate as low as we can consistent with the law,” Carson said.
Carson also didn’t commit to eliminating the “life of loan” mortgage insurance requirement for FHA mortgages. With non-FHA mortgages, borrowers only have to pay for mortgage insurance until the borrower has achieved 20 percent equity, but borrowers must keep paying for insurance for FHA mortgages until the loan is fully paid off.
Eliminating the lifetime loan fee would help borrowers “better withstand economic shocks and thereby reduce defaults,” Brown said.
Carson said that requirement was put in place to hedge against a major financial crisis and that HUD would look at it “with the goal of protecting the American taxpayer.”
Public-private partnerships are a hallmark of success in America, according to Carson.
The Trump administration is looking at the “totality” of the problems we have as a society and how to address them using the totality of our resources, including different government agencies and departments working together, he said.
But the country’s economic strength is not its government, but its people, according to Carson.
During his listening tour, where Carson said he looked at programs that work versus those that don’t, he found that “the most successful [initiatives] seem to be when we address the whole person and the whole community.”
“All of our people are resources, human resources, human capital to be developed,” he said.
By partnering with private companies in which their incomes depend on an initiative’s success, HUD has been able to “leverage federal funds 10 or 15 times” compared to the old way of doing things in which the government would “plop down $50 million” and move on, Carson said.
“We should look for cooperation with all kinds of organizations, your organization, a great organization,” Carson added.
He cited a quote he mistakenly attributed to Alexis de Tocqueville: “America is great because America is good and if America ever ceases to be good it will cease to be great.”
“I want to thank you for helping to make America good,” he told attendees.
Brian Sears, chair of the Regulatory Issues Forum said, “We feel confident that this partnership [between HUD and NAR] will continue to flourish under Secretary Carson and the new administration.”
Carson had time to answer only one question from the audience. The question came from a member of the San Mateo County Association of Realtors in California who asked what Realtors can do to expand the Section 8 housing voucher program and where Carson sees that program going in the future.
Carson noted that “there are three or four times the amount of people in need of affordable housing than we are able to provide right now” and he would like to get the “private sector to participate in this.” He did not specify how.
Attendees gave him a standing ovation as he left.