HR-6125-119
Referred to the House Committee on Financial Services.
Sponsored by Joyce Beatty (D-OH)
What it does
This bill would amend the National Housing Act so that first-time homebuyers who complete a financial literacy housing counseling program before applying for an FHA-insured mortgage receive a mortgage insurance premium that is 25 basis points lower than the standard premium set by HUD. It replaces the current flat 2.75% cap on the premium with this new discount-based formula tied to counseling completion.
Who benefits
First-time homebuyers using FHA loans who complete an approved financial literacy counseling program before signing a mortgage application or sales agreement, who would pay a lower ongoing insurance premium. HUD-approved housing counseling agencies, which would likely see increased demand for their services. Mortgage lenders originating FHA loans to counseled borrowers, who may see somewhat lower default risk.
Who is hurt
First-time buyers who cannot access or complete counseling before applying (due to time constraints, lack of nearby counseling providers, or tight home-buying timelines) would not receive the discount and could effectively pay relatively more than counseled peers. The FHA insurance fund could see reduced premium revenue per discounted loan, a cost that could affect the fund's reserves unless offset elsewhere. Buyers who already signed applications or sales agreements before completing counseling would be ineligible under the bill's sequencing requirement.
Supporters argue
Supporters argue that financial literacy counseling has been shown to reduce mortgage default rates, and that rewarding completion with a lower premium encourages more first-time buyers to get counseling before committing to a purchase, better preparing them for homeownership costs. They contend this could strengthen the long-term stability of the FHA insurance fund by lowering default risk among counseled borrowers, while giving buyers a modest, predictable financial incentive to seek out free or low-cost HUD-approved counseling.
Opponents argue
Opponents argue that requiring counseling completion before signing any application or sales agreement could disadvantage buyers in fast-moving housing markets or areas with limited counseling access, effectively denying them the discount through no fault of their own. They contend the fixed 25 basis point reduction may not be actuarially matched to actual risk reduction from counseling, potentially straining the FHA insurance fund's finances if the discount is set too generously relative to real default-rate improvements.
Constitutional context
Congress has broad authority under Article I to establish and regulate the terms of a federal mortgage insurance program it created; this bill raises no significant constitutional question beyond that established spending and regulatory power.
Checks and balances
Congress sets the statutory premium discount formula directly in law, while HUD's Secretary retains authority to set the baseline premium and implement counseling program requirements; no significant shift in power between branches occurs.
Historical precedent
HUD has long required or incentivized housing counseling for certain FHA borrowers, including existing pre-purchase counseling programs and reduced-documentation streamlined refinance options tied to counseling.