Lenders Say FHA Needs to 'Modernize'.(Federal Housing Administration)

Park City, UT -- An official of the Mortgage Bankers Association suggested here 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 homebuyers, backing more loans to these so-called underserved borrowers than Fannie Mae and Freddie Mac combined.

But he told the 2005 Midwinter Housing Conference here 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 10-year period between the years 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 ...