The Federal Housing Administration: Study of the Barriers to the Use of FHA Programs

Due to the rise in subprime mortgage lending and the increasing influence of the broker/wholesale delivery channel for originating home mortgages by 2004, the Federal Housing Administration’s (FHA’s) share of the mortgage finance industry had significantly eroded. Due to these market shifts, FHA became concerned about its ability to fulfill its mission to serve underserved and unserved housing markets. Concentrance was contracted to understand the nature of these market shifts and the barriers to the use of FHA mortgage insurance programs, as well as to recommend to FHA strategic courses of action to help reduce these barriers.

To perform this study, Concentrance embarked on a research design that sought to gather primary and secondary data on virtually all aspects of mortgage lending and perform analysis that would result in strategic recommendations. The research team conducted total of 173 in-depth one-on-one interviews with individuals and organizations engaged in housing and mortgage finance in six Metropolitan Statistical Areas. We reported on and studied market trends, changing channels of distribution, and the role of broker/wholesale markets to gain insight on the perspectives of mortgage finance participants relative to the barriers to the use of FHA programs.

As a result of this study, FHA has proposed legislation to Congress to reinvigorate and modernize its programs, which was included in the passage of the Housing and Economic Recovery Act of 2008.  In addition to new legislation, FHA has adopted our recommendations to enhance customer responsiveness and customer relationships, and to re-engineer its processes to remove barriers to the use of FHA programs.

As a result of the success of this study, Concentrance has been engaged in numerous additional contracts with FHA to determine ways in which their programs and offerings can be enhanced to better serve their customers and the industry. The Study continues to serve as a guide for ways in which FHA may enhance their offerings and programs.