DALLAS -- Reforms to stem losses of the Federal Housing Administration insurance fund are pricing thousands of prospective homebuyers out of the market, the president of the Mortgage Bankers Association of America says.
Proof of that: FHA loan volume has fallen to its lowest level in six years while the volume of other home loans has risen, Angelo Mozilo, the mortgage group's president, said recently.
The volume of conventional loans -- those not insured by the government -- rose 159 percent in the same period, said Mr. Mozilo, who also is president of Countrywide Funding Corp., a Pasadena, Calif., mortgage banking company.
To counteract losses to the FHA insurance fund, which protects loan issuers from default, the FHA increased down payment costs, required a higher amount of closing costs to be paid rather than financed, and boosted the insurance fund premium.
The first two moves boosted up-front costs for most FHA buyers by about $1,000, Mr. Mozilo said. The premium increase added about $32 a month to a typical payment on a $75,000 FHA-insured mortgage, he added.
The Mortgage Bankers Association estimates that those changes priced as many as 250,000 prospective homebuyers out of the market nationwide.
"The very people FHA was designed to help are now being excluded" because of the changes, Mr. Mozilo said.
Minorities are being especially hard hit, he added.
"Twenty-five percent of all FHA loans are made to minority citizens, a rate that's more than twice the minority population," he said. "The higher costs of FHA loans are bound to hit this group the hardest, as national data show their savings are typically lower."
Mr. Mozilo said most of the insurance fund losses had been suffered in the FHA's apartment programs. Even with substantial single-family program losses in oil patch states and other economically depressed areas, the single-family program turned a $66 million profit in fiscal 1990, he said.