HUD launches small-mortgage pilot to reach underserved borrowers
H.R. 6774 — FHA Small-Dollar Mortgages Act · Filed by Maxine Waters (D-CA) · 1 cosponsor · Introduced Dec 17, 2025 · Referred to committee
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What it does
This bill directs the Secretary of HUD to create a 4-year pilot program to expand access to mortgages of $100,000 or less for owner-occupied homes. The program may include direct payments to lenders to encourage small-mortgage origination, reduced FHA fees, grants to borrowers for down payments and closing costs, and technical assistance to lenders. HUD must report annually on outcomes, risks to the mortgage insurance fund, and regional demand.
Why we flagged it
The bill establishes a time-limited experimental program to address a documented market failure in small-mortgage lending. It is not a permanent entitlement or broad deregulation, but a targeted pilot with built-in sunset and reporting requirements.
What the text implies
- The program may increase demand for FHA insurance on mortgages that are inherently less profitable for lenders, potentially straining the Mutual Mortgage Insurance Fund if default rates exceed projections—the bill requires risk analysis but does not cap exposure.
- Direct lender subsidies may create moral hazard: if lenders know HUD will pay them to originate small mortgages, they may reduce underwriting rigor or originate loans to borrowers less likely to succeed, shifting default risk to the insurance fund.
The full analysis lists 4 implications of this text.
Who stands to gain
mortgage lenders and servicers (direct payments for origination); real estate investment trusts (REITs) with mortgage portfolios; FHA-insured mortgage originators