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Statement of Need: This rule will propose changes to the Title I Property Improvement Loan Program necessary to reflect the market and economic changes in home improvement lending in this country. With regard to the market, many new conventional no-equity or low-equity loan products have been introduced in the last few years. Economically, the Department wants to reduce fraud and abuse in the program to mitigate the financial impact on the FHA Insurance Fund. In addition, changes are needed to ensure that use of the program complies with the Congressional intent of the program.

Summary of the Legal Basis: Title I of the National Housing Act, as amended.

Alternatives: There has been too much abuse and fraud in the existing program to leave the current rules unchanged. Insufficient information is available to judge the merits and disadvantages of terminating the whole program.

Anticipated Costs and Benefits: Lenders will incur some minor additional costs for additional documentation and review of borrower and contractor performance. However, the benefits of the reduced defaults that are projected should offset these additional costs. A program with less fraud and abuse should attract additional lenders to the program making the program more readily available to borrowers.

Risks: Some existing lenders have already decided to reduce their participation in the current program by focusing on alternative loan products. These changes could accelerate this situation and reduce the availability of Title I loans in some markets.