An official of the Mortgage Bankers Association warned last week that the Federal Housing Administration could eventually be forced out of the mortgage insurance business if it doesn't modernize, and keep up with the competition.

John Robbins, who is in line to become MBA chairman in 2007, said the FHA is instrumental in providing financing for immigrant and minority home buyers, backing more loans to these so-called "underserved" borrowers than Fannie Mae and Freddie Mac combined.

But he told the Midwinter Housing Conference in Park City, Utah, that the agency has become "very difficult to do business with," and could wind up being a chapter in the housing history books if it doesn't keep up with the times.

But Angelo Mozilo, chairman of Countrywide Financial Corp., Calabasas, Calif., went further, saying the FHA is already on the verge of being unnecessary. The agency "is making itself irrelevant by forcing Fannie Mae and Freddie Mac to take a lot of their product," the outspoken former MBA president said.

Mr. Robbins, who is chairman of the American Mortgage Network, said that with the growing dominance of minority households, which tend to face serious affordability problems, the need for government-insured mortgages is more important than ever.

According to projections by the Harvard Joint Center for Housing Studies, minorities will be responsible for two-thirds of the growth in total households over the ten-year period between 2000 and 2010.

But the 80-year-old FHA already is key to the housing aspirations of minorities, according to the MBA's figures. Although its share of the mortgage market is only 3 percent, a third of its originations are to minorities vs. 18 percent for the conventional market.

In addition, the agency makes the same number of loans to minorities as the GSEs together. And it is responsible for half of all loans to borrowers who earn less than $50,000 a year.

Builder William Hudson of Brownsville, Texas, said government-insured financing is critical to his buyers, 90 percent of whom are low-income Hispanics. Without the FHA, he said, they'd be forced to pay higher rates in the subprime sector, or be forced out of the market altogether.

But Mr. Robbins pointed out that the agency is being "adversely selected" by originators, with the better loans going to private insurers and the FHA getting what's left.

"In that (the FHA) is not getting enough high quality loans to balance out the greater risk, it ultimately could be forced out of business" unless it shapes up, the future MBA president said.

The FHA has to "keep pace" with the rest of the mortgage market by investing in technology and human resources, and by becoming more innovative in terms of loan products, the industry spokesman told the conference.

The FHA "can be an incredibly important part of the housing finance system in the future," said Mr. Robbins, who placed the FHA reform at the top of MBA's list of key issues.

"We want them to be here, but they have to keep pace with the rest of the market to remain viable."

Published: March 9, 2005

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.