TAMPA, Fla. — The U.S. Department of Housing and Urban Development has announced 14 changes to the Federal Housing Administration’s single-family mortgage insurance program, saying the updates are designed to reduce regulatory burdens, lower administrative costs for lenders and make the mortgage process more efficient.
The policy changes affect several areas of FHA lending, including the agency’s renovation loan program, contractor payment schedules, and appraisal requirements.
Callen Jones, a Tampa Bay real estate agent and broker, said many consumers misunderstand what an FHA loan is and who can use one.
“People think that it’s a specific program for first-time buyers. It’s not. It’s actually a national government program that says here’s a loan type, and here are the regulations within it,” Jones said.
Jones said the administration’s goal is to simplify the lending process by removing regulations that add costs without providing significant benefits.
One change he believes could have an immediate impact involves FHA renovation loans. Contractors working on those projects can now receive payments in four installments instead of two.
“If you open the door to contractors being able to be paid more times, that allows the smaller contractors to bid for those jobs because they don’t have as much overhead,” Jones said. “Rather than having to hire the biggest company that has the most money in their pocket, we can give work to people because we live in an area where there are a lot of houses that need work, especially after hurricanes.”
Jones said the policy could also expand opportunities for buyers interested in purchasing homes that need repairs.
“That’s a huge benefit of an FHA loan because you could buy a house that otherwise wouldn’t be approved,” he said.
While Jones supports efforts to make the lending process more efficient, he said not every change is without concern. He pointed to proposals that rely more heavily on automated property valuations.
“I don’t love the idea of changing appraisals to be something that’s just going to be done by a computer,” Jones said. “That software already exists, and a lot of entities already use it for refinances and other financial aspects of buying a house. I think people need to remain diligent.”
He encouraged buyers to work with trusted real estate and mortgage professionals to better understand how the changes apply to their situation.
“You don’t know what you don’t know,” Jones said. “That’s why you have a trusted Realtor. You have a trusted mortgage broker. We hope these changes are able to be explained by the people in those roles so buyers understand their options.”
Jones said the updates are unlikely to make homes more affordable on their own because the biggest pressures on buyers remain home prices, inventory, and mortgage rates.
“The hope is that if it’s less expensive for the lender, then that could pass down and hopefully be less expensive for the buyer in the end,” he said.
Even so, he said Florida’s housing affordability challenges developed long before the latest FHA policy changes.
“The reality is we’ve had a housing crisis in many ways for decades, and it looks different depending on where you live,” Jones said. “Florida exploded during COVID because we had so much less regulation than other areas. In our area, home values appreciated more than 25% in one year. That’s not economically sustainable for a housing market because wages didn’t go with it.”
Jones said one misconception he frequently hears is that FHA loans are only available to first-time buyers.
“The FHA loan is something that you can use more than once,” he said. “It’s not just for first-time buyers. If more people are using FHA loans, that does allow more people to buy houses.”
HUD says the changes are intended to improve the efficiency of FHA-insured mortgages while reducing administrative burdens for lenders. Housing professionals say it will take time to determine whether those efficiencies ultimately translate into savings for homebuyers.