To help more moderate-income families become home owners, former HUD Secretary Henry Cisneros has called for higher FHA loan limits in high cost markets.

The current ceiling on loans that can be backed by the Federal Housing Administration in such expensive markets as San Francisco, San Diego, New York and Boston is $239,250. But in some places, that's not nearly high enough to get would-be buyers into median priced houses, Cisneros pointed out. For a complete list of FHA loan limits by location, press here.

Government-insured loans "can't help people move into home ownership if they can't use them," he said.

Buyers in high-cost areas who can qualify for conventional financing can borrow greater amounts, up to $275,000 if their loans conform to the underwriting guidelines set down by Fannie Mae or Freddie Mac, and even more if they are willing to pay the somewhat higher rate charged by so-called "jumbo" lenders.

But many low and moderate-income buyers aren't qualified to secure funding elsewhere. So they apply for FHA-insured mortgages, which are often considered the financing of last resort.

Consequently, Cisneros, who ran the Department of Housing and Urban Development during Bill Clinton's first term as president, believes the FHA limit should be raised in the 19 areas currently deemed to be high-cost -- and not just up to the Fannie Mae-Freddie Mac limit, but beyond if necessary to reach more prospects.

Cisneros's recommendation was one of several ideas he set forth for boosting the nation's home ownership rate at the National Association of Real Estate Editors' conference held earlier this month in Salt Lake City.

The former HUD chief also said local elected officials "must be more open to higher density" housing. Land is just too expensive for low density development, he said, noting that it has become "so much easier to build" in the suburbs than on infill sites.

In addition, he called for the elimination of redundant closing costs, the creation of home ownership zones that would provide the funding local governments need to assemble sites, the rehabilitation of old structures, rejuvenated infrastructures, and incentives for local authorities to establish trust funds to help attract the middle class back to urban centers.

Built from local resources, the trust funds would provide secondary financing to "help fill the gap" so families could afford to move back downtown, he said.

Cisneros is now head of American City Vista, a venture with K&B Homes to build infill housing in America's cities, told a group of about 100 real estate reporters and broadcasters that the latest Census Bureau figures point to a resurgence of many cities. "It's the most hopeful sign we've seen in 30 years," he said.

Noting that the country's population grew faster over the last 10 years than at any time since the 1960s, he said that growth "has shown itself" in numerous urban locations:

• New York's population reached 8 million for the first time.

• Atlanta grew for the first time since the 1950s.

• 91 percent of the 3.8 million new residents in Texas live in the state's 27 metro areas.

• Even cities which did not grow overall reported more downtown dwellers.

Much of this growth is driven by an increase in immigrants and a higher birth rate among immigrants, the former housing secretary said. Moreover, the incomes of these newcomers has increased, in some case doubling their spending power in just 10 years.

He said that if the nation's ownership rate is going to rise beyond the current 68 percent level, the focus must be on the nation's black and Hispanic communities, which lag far beyond whites when it comes to ownership. Currently, only 47 percent of African Americans and just 46 percent of Hispanics own their homes compared to 72 percent of all whites.

Cisneros said that a legitimate goal for minority ownership over the next decade would be something in the 52-54 percent range.

For more articles by Lew Sichelman, please press here.

Published: June 20, 2001

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