Effective immediately, the Federal Housing Administration (FHA) will no longer require two appraisals on higher-balance loans for properties located in declining markets.
The two-appraisal mandate (both were required prior to an underwriting decision) was put into place at the peak of the housing crisis. But "we haven't noticed any benefit" from the rule, "and it really slowed down the process," FHA Commissioner David Stevens told Mortgage Wire at the National Association of Realtors' (NAR) convention in San Diego, where he announced the policy change over the weekend.
The move was hailed by NAR officials, who have been seeking the change. But they were disappointed that Stevens, who headed Long & Foster Realtors, the nation's largest independent brokerage firm, before his appointment and is considered one of the Realtors' own, did not announce a change in policy requiring that condominium reserves be fully funded. He told Mortgage Wire that the problem of unfunded reserves is particularly acute in resort markets where there is an excess supply of new but unsold apartments.
"We're all about owner-occupancy," he said. "I'm not sure it is up to the FHA to fill that void."
In his remarks to the conference, Stevens, who also has worked for Freddie Mac and Wells Fargo, said the FHA's share of originations "may be significantly higher" at year-end than the current 25% level.
But he also said he is looking forward to the time when FHA originations will shrink back to a more normal level.
"We are here to bear witness to the countercyclical role the FHA was created to play," he said. "And we will be here until private capital returns to the housing finance system."