Housing Financial Literacy Act of 2021

Floor Speech

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Mr. McHENRY. Madam Speaker, I yield myself such time as I may consume.

Madam Speaker, I want to thank the gentlewoman from Ohio (Mrs. Beatty) for all of her hard work on H.R. 1395, the Housing Financial Literacy Act of 2021.

The Federal Housing Administration, FHA, currently provides government-backed mortgage insurance to more than $1.3 trillion in loans. FHA insurance allows a wide array of borrowers to qualify for mortgages. This includes many low- and moderate-income families who might not otherwise have access to credit through traditional underwriting.

In fiscal year 2020, the FHA insured over 800,000 forward mortgage purchase loans, with more than 83 percent going to first-time home buyers. Given the large population of first-time home buyers using FHA, it makes sense to encourage those individuals to seek out ways to strengthen their financial knowledge and better prepare them for the challenges of homeownership.

Right now, current law states that FHA has the ability to provide first-time homeowners with a discount on their FHA upfront premiums. However, the homeowner must complete an approved homeownership financial counseling course.

Yet, the statute is drafted in such a way that the provision only applies in particular circumstances. This includes when FHA upfront premiums exceed 2.75 percent. Since FHA upfront premiums are currently set at 1.75 percent, the rate has not been exceeded in a decade. Thus, FHA does not currently provide an upfront premium discount to first- time home buyers who complete a financial counseling course.

H.R. 1395 would amend current law to require FHA to provide a one- quarter percent upfront premium discount, from the prevailing rate, in order to help those first-time home buyers get financial literacy and then get the discount. This equates to about $625 of savings off the current premium structure on a $250,000 mortgage. This is not an insignificant amount.

Given the nature of this, I think it is great to have a financial benefit for people understanding financial consequences. I think there are many other areas in our government that would benefit from this type of thinking.

The hope is that by making such a discount mandatory, more first-time home buyers will seek out financial literacy counseling which, in turn, will produce better outcomes for a traditionally at-risk group of home buyers.

The bottom line is that FHA is a valuable tool to help expand the universe of mortgage credit in our housing system. We ought to be doing all that we can to ensure that we are using our limited public resources to encourage all borrowers to be well-prepared for the commitments of homeownership through financial counseling or through other effective means of creating more stable and reliable borrowers.

So I think this is a very good bill thoughtfully done by Mrs. Beatty, and it is bipartisan, coming out of committee last Congress.

Madam Speaker, I have no more speakers. I urge its adoption, I ask my colleagues to vote ``yes,'' and I yield back the balance of my time.

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