Brian Montgomery was a busy man last week. Barely four months into his job as Assistant Housing Secretary at the Department of Housing and Urban Development and Federal Housing Administration Commissioner, Montgomery went coast-to-coast to speak to two industry groups.

First he hit the Mortgage Bankers Association's annual convention in Orlando, where he pinch hit for his worn-out boss, Sec. Alphonso Jackson. Then he was off to the National Association of Realtors confab in San Francisco.

The two groups don't always see eye-to-eye, but they agreed with what Montgomery had to say: That the FHA needs to be upgraded or it will soon become irrelevant. "We can't continue to be unique," he told the MBA. "We can't protect anyone if no one is using our product."

The FHA backs home buyers that prime lenders -- and private mortgage insurers -- don't want. It does that by promising to make lenders whole if the borrower fails to make his mortgage payments. Without the government's help, borrowers would be forced either into the nether world of subprime lending, where interest rates are soften several percentage points higher, or to the sidelines altogether.

Uncle Sam's qualifying rules tend to be more liberal than those of primary lenders and private insurers. But the paperwork is often a killer, so many lenders tend to shy away from the program.

Last week, though, Montgomery made good on Sec. Jackson's pledge to restore the agency to its former place of importance in the pecking order of home loans -- it pioneered the 30-year fixed rate mortgage -- by announcing several key changes. Or, at least one change and another one that is in the works.

At the NAR meet, he said the FHA is boosting the amount that can be borrowed under the "new" streamlined 203(k) renovation loan program.

When the "limited repair" version of the regular program was announced in June, the ceiling on the amount that can be rolled into the loan's principal without the need for an extra appraisal or other documentation was $15,000. Now, it will be $35,000.

That will make it far easier for people to buy houses that need a new roof, new furnace, new windows or other "straightforward" repairs. Without the 203(k) program, they would either have to take a pass on such properties or take out a second, more expensive loan to pay for the work. Now, though, they can add the cost of these and other fixes into a single FHA-insured mortgage.

The streamlined option doesn't replace the standard 203(k) program, which allows borrowers to include the cost of major repairs into their loans. But it is intended to speed the sale of "as is" properties which needs just a little work -- and $35,000 is one heck of a lot of little work.

The change is important because the FHA, in the name of consumer protection, often requires a laundry list of repairs be made prior to closing. Typically, though, the list is unclear and, while minor in the eyes of the seller, the fixes are sometimes expensive and time-consuming. Thus, realty agents and their clients tended to go elsewhere for financing.

At the MBA meeting, meanwhile, Montgomery also said the FHA intends to soon raise the amount of funds home owners can receive in a cash-out refinancing. The plan is to hike the loan-to-value ratio on cash-out refis to 95 percent. Currently, FHA borrowers must maintain at least an 85 percent LTV in a refinancing transaction.

Cash-out refinancings at the higher LTV will be for "those homeowners who have demonstrated an ability to manage their obligations," Montgomery said.

Published: November 2, 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.