As part of its plans to address the housing shortage, the Federal Housing Administration is planning to revamp its Section 203(k) home renovation loan, senior Department of Housing and Urban Development officials said.
Lenders have been increasing their involvement with home renovation products as refinancings dwindle and owner tenure continues to rise. The average amount of time homeowners spend in one house reached a record 10.6 years in May, according to First American.
The FHA’s program allows borrowers to finance home renovations either for purchase or refinance, but has had its ups and downs over the years. As far back as 1999, a Government Accounting Office audit accused HUD of neglecting 203(k).
While it’s an important product for housing rehabilitation and renovation, it hasn’t been modernized in quite some time, and its uses have remained narrow, an official elaborated during a briefing.
So it’s a priority for the FHA to update 203(k) and make it more useful for today’s housing market.
Another property improvement product insured by the FHA is the Title 1 loan and its use cases include manufactured housing as well as real property.
But, like the 203(k), it too has not seen any attention from FHA for an extended period, until now. The agency has updated some of the provisions of how the Title 1 program works to make it easier for lenders to understand and implement, but it is also looking at raising its loan limits to a level that is appropriate to today’s housing market, the official said.
Meanwhile, discussions about increasing the use of accessory dwelling units to meet housing supply needs have taken place among various stakeholders, and that is attracting the agency’s interest.
But as it elevates the visibility and importance of manufactured housing in the program, the FHA is also looking at what it can do on ADUs, which it currently has no specific programs for, the HUD officials said.
The agency is also working to increase the number of small-balance mortgages the FHA insures. The officials noted that the economics of the mortgage business favors lenders prioritizing applications with larger balances, primarily because of the compensation structure.
Another initiative involves updating its manufactured housing construction and safety standards, more commonly known as the HUD Code.
This proposal will allow production of manufactured homes with features that are demanded by consumers and are more comparable to site-built homes, such as roof pitch designs, open floor plans and multi-unit dwellings.