The

Consumer
Federation
of
America
(CFA)
is
calling
for
policy
changes
that
would
help
alleviate
the
difficulties
for
homebuyers
using


Federal
Housing
Administration
(FHA)
loans
when
competing
in
tight
markets.

Buyers
using
FHA
loans
often
face
stigmas
and
cannot
use
many
of
the
competitive
strategies
commonly
utilized
by
conventional
borrowers
and
cash
buyers,
according
to
a

recent
report
from
the
CFA. 

“As
first-time
homebuyers
and
homebuyers
of
color
disproportionately
rely
on
FHA,
the
stigma
of
this
mortgage
product
makes
it
even
harder
for
them
to
buy
a
home,”
according
to
the
report
authored
by
the
CFA’s
Sharon
Cornelissen
and
Austin
Harrison.

“The
stigma
associated
with
FHA
is
stronger
when
markets
are
highly
competitive
and
in
places
where
FHA
is
less
common,
including
more
affluent
and
white
communities.”

The
report
calls
on
more
states
and
cities
to
pass
“source
of
income”
or
“source
of
financing”
anti-discrimination
statutes
and
enforce
them
to
protect
homebuyers.

These
anti-discrimination
statutes
make
it
illegal
to
refuse
to
rent,
sell
or
lease
housing
because
of
a
lawful
source
of
income
being
provided.

The
authors
suggest
a
two-fold
recommendation
—
that
more
states
and
local
municipalities
pass
“source
of
income”
legislation
so
that
tenants
and
homebuyers
will
be
better
protected;
and
for
the


U.S.
Department
of
Housing
and
Urban
Development
(HUD),
state
attorneys
general
and
fair
housing
organizations
to
start
applying
this
legal
framework
to
homebuyers.

FHA
loans
accounted
for
15.6%
of
the
U.S.
mortgage
market
in
2023,
up
from
14.3%
in
2022,
according
to
HUD.
Because
FHA
accepts
lower

credit
scores,
higher
debt-to-income
ratios
and
lower
down
payments
than
most
conventional
mortgages,
first-time
buyers
have
relied
on
them
due
to
the
ongoing
affordability
challenges
in
today’s
housing
market
from

elevated
prices
and

mortgage
rates.

The
FHA
should
critically
evaluate
and
simplify
inspection
criteria,
review
the
inspection
requirements
for
FHA
appraisals,
and
modernize
criteria
wherever
possible
“to
help
reduce
homebuying
hurdles
over
non-essential,
smaller
home
repair
issues,”
the
authors
wrote.

An
accessible
checklist
on
the
FHA
website
would
give
home
sellers,
buyers,
housing
counselors,

real
estate
agents
and
others
a
reliable
source
of
information,
according
to
the
report.

The
CFA
also
called
on
real
estate
associations
to
better
educate
agents
on
sources
of
financing
discrimination
and
how
to
successfully
work
with
FHA
buyers.

Organizations
such
as
the

National
Association
of
Realtors
(NAR),
the

National
Association
of
Hispanic
Real
Estate
Professionals
(NAHREP)
and
the
National
Association
of
Real
Estate
Brokers
(NAREB)
“can
help
by
making
source
of
financing
discrimination
part
of
their
Code
of
Ethics
and
their
training
of
real
estate
agents
on
how
to
fairly
communicate
housing
bids
to
their
sellers,”
the
authors
said.

“In
the
end,
no
FHA
buyer
should
be
unfairly
disadvantaged
just
because
a
broker
is
unfamiliar
with
this
product
and
fails
to
adequately
educate
and
inform
a
home
seller.”

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