Officials with the U.S. Department of Housing and Urban Development descended on Philadelphia on Tuesday to visit the home of a homeowner in the city's Point Breeze neighborhood and discuss the expansion of a program that helped them afford renovations to their home.
On Tuesday morning, officials announced changes through the Federal Housing Administration policies for its 203(k) Rehabilitation Mortgage Insurance Program.
Officials said the changes "will modernize the program and enhance its usefulness for individuals and families seeking affordable financing for renovating or rehabilitating a single-family home when purchasing or refinancing it."
“HUD has programs not only to help families purchase a house, but to help them repair their homes,” said HUD Acting Secretary Adrianne Todman in a statement on Tuesday. “Today, we are modernizing and expanding this program, helping both homebuyers and homeowners fix up their homes. This is one more action the HUD and the Biden-Harris Administration is taking to improve our country’s housing supply.”
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Officials made the announcement at the Tasker Street home of Kasan Simmons, a borrower who used the FHA 203(k) program to finance renovations to his home.
As detailed in a statement from HUD, the 203(k) program allows borrowers to use FHA-insured financing to include the cost of rehabilitation or repair in a single mortgage used to purchase or refinance a home.
The program covers structural repairs such as foundations and new roofs, modernization of kitchens and bathrooms, and projects to increase energy efficiency and climate resilience, HUD officials said in a statement.
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“The changes we are announcing today for the 203(k) program are long overdue and will support greater use of this program where it is needed most – in neighborhoods where homes are affordable but need repair,” said Federal Housing Commissioner Julia Gordon in a statement. “Increased use of 203(k) mortgages will help modernize and revitalize homes, which supports affordable housing supply and strengthens neighborhoods.”
FHA offers two variations of the 203(k) program: the Standard 203(k), which may be used for substantial remodeling and repairs, and the Limited 203(k), which may be used for minor remodeling and nonstructural repairs.
The changes announced on Tuesday modify both programs, and include:
- Increasing the allowable total rehabilitation costs a borrower can finance under the Limited 203(k) program from $35,000 to $75,000 and reviewing this limit annually to ensure it continues to keep pace with market conditions.
- Providing more time for rehabilitation and repair work to be completed by extending the rehabilitation period to 12 months for the Standard 203(k) and nine months for the Limited 203(k).
- Allowing the financing of the 203(k) Consultant Fee in the total mortgage amount for the Limited 203(k) if a borrower chooses to use a 203(k) Consultant.
- Increasing the allowable fees that a 203(k) Consultant can charge for various activities, which have not been updated since 1995. The new fee structure is designed to appropriately compensate Consultants for their role and encourage more Consultants to participate in the program.
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