A transformation has been under way here that is changing the homeownership prospects - and choices - of thousands of first-time, moderate-income and minority families. It's also keeping more owners in their houses instead of facing foreclosure when they fall behind on payments.
The Federal Housing Administration, long derided as the lending choice of last resort, has turned itself into what is arguably the consumer-protection leader in the mortgage industry, both for buyers and owners.
And FHA isn't modest about its changes. You've probably seen its nationwide TV commercials touting its beefed-up appraisal protections for borrowers.
Unlike the conventional housing market, which is moving rapidly toward "automated valuations" done by computer, FHA has pushed through a tough new program for more hands-on appraisals.
Not only must a state-licensed and FHA-trained appraiser perform the physical valuation, he or she must flag any readily observable defects in the house for possible inspection follow-up.
Appraisers in the conventional mortgage market have no such activist requirements, nor are they subject to computer-assisted performance evaluations that search out - and get rid of - poorly performing appraisers.
Once FHA buyers are in their homes, they are dramatically less likely today to lose their properties to foreclosure than just a few years ago. Under stringent new rules, FHA lenders are now required to explore every possible remedy to help buyers who fall behind on payments to remain in their homes. Whereas formerly the vast majority of seriously delinquent FHA homeowners received no "workout" assistance or counseling to help them keep their houses, now more than 80 percent receive some form of remedial assistance.
That can range from modifying the original terms of the mortgage to allowing a little extra time to catch up on back payments.
Though 80 percent is just a statistic, it represents 35,000 actual families allowed to retain their homes when financial trouble - illness, job loss, family crises - hits them unexpectedly.
FHA has also polished up its long-tarnished image in other ways as well:
Technically bankrupt and spilling red ink at the start of the 1990s, FHA now earns millions of dollars a year for the federal Treasury. It's under pressure to share some of its recent profits with its borrower-customers, and is expected to announce a rebate plan sometime in the coming weeks.
Originally designed by Congress to serve buyers who face difficulties obtaining conventional, nongovernmental mortgages, FHA in earlier decades didn't always do so. In the mid-1990s, only 60 percent of its customers were first-time purchasers; last year fully 82 percent of its 1.3 million new borrowers nationwide were first-timers. In the early 1990s, just 20 percent of FHA borrowers were from minority groups, but under its outreach program 42 percent of its customers this year are minorities.
Though FHA's target markets are households with weaker credit and lower incomes than the conventional market, recent investigations of so-called "predatory" lending have found that conventional market lenders account for the majority of high-fee, rip-off home mortgages. Most predatory loans are traceable to "sub-prime" and other conventional lenders who are not subject to the intensive regulatory oversight and rules FHA lenders must do business under.
In Baltimore, FHA is demanding that lenders who have made abusive or fraudulent mortgages harmful to customers restructure the loans or reimburse borrowers. There is no parallel effort under way in the conventional market, where most predatory loans are made.
FHA and its parent agency, the Department of Housing and Urban Development (HUD), have gotten out front of conventional market lenders in urging that consumers receive access to whatever credit scores or credit-decision software lenders use to grant or price mortgages.
HUD Secretary Andrew M. Cuomo called for "complete transparency" in mortgage credit decision-making long before conventional lenders. Pushed by legislators at the federal and state levels, private-sector companies are now in the process of opening credit scores and scoring technology to consumers. Fair, Isaac and Co., developer of the "FICO" scores used by virtually all conventional lenders, will soon provide credit reports, scores and explanations to consumers on its Web site.
Does FHA's sudden bounce to the head of the consumer-advocacy bandwagon mean an FHA loan is the "right" loan for you? Hardly. Privately insured conventional loans are increasingly competitive with FHA on minimum down payments, and may cost you less per month.
Moreover, FHA mortgage insurance is noncancelable for the life of the loan, unlike private mortgage insurance, which often can be terminated when your equity stake exceeds 20 percent.
But FHA's new consumer protections are a big plus. They make FHA an alternative for anyone buying a modestly priced first home - not just as a last resort, but as a reasonable first choice.
Kenneth R. Harney is a syndicated columnist. Send letters in care of the Washington Post Writers Group, 1150 15th St. N.W., Washington D.C. 20071.