"Thank you, Mr. Chairman.

FHA is a program that’s vital to American homebuyers, and it’s one that is important to me personally.  I have been in the mortgage business and working with FHA-insured loans since 1978.  In fact, I purchased my first home with FHA.

Currently, FHA is experiencing a rebirth.  I want to preface my remarks this morning with a direct appeal to Congress – if we don’t take this opportunity to be proactive and get FHA the resources it needs, the recent reemergence of FHA won’t last long.  We have a chance to prevent future problems at FHA, but that effort must start today.

For over 11 years, MBA has advocated for FHA modernization, including during the height of the subprime lending boom.  The Financial Services Committee, on a truly bipartisan basis, made modernizing FHA a priority, and Congress was able to pass the historic Housing and Economic Recovery Act, or HERA, last year.  It contained many of the reforms needed at FHA – but clearly more needs to be done.

First and foremost, we need to give FHA the resources it needs to operate in an increasingly nimble and high-tech real estate finance industry.  FHA’s market share has risen from 3 to 30 percent virtually overnight, but it’s still hampered by outdated technology and its staff is stretched thin.  The result is a diminished ability to detect and root out fraud, remove bad actors from the program, approve new lenders, and process mortgages.

The solution is fairly straight-forward.  Under HERA, Congress has already authorized $25 million per year for staffing and technology upgrades.  Now we need to work together to make sure this funding is appropriated.  MBA also supports putting FHA on a level playing field with other financial regulators, so it can recruit better talent.  And FHA should be able to keep some of the premiums it collects, so it doesn’t have to come begging for funding.

We also need to make sure Ginnie Mae has the resources it needs to keep pace with the spike in government lending.   From ’07 to ’08, Ginnie Mae issuance increased from $85 billion to $221 billion, and this year Ginnie is on pace to top that.  However, the number of full-time employees has remained virtually stagnant.  MBA proposes beefing up Ginnie Mae by increasing its staff from the current 65 to at least 90.

To further protect FHA, its borrowers, and ultimately the taxpayers, MBA believes FHA-approved lenders and brokers should be held to the highest levels of accountability, knowledge and professionalism.

For these reasons, MBA recommends raising FHA’s existing net worth and bonding requirements.  These requirements enable lenders and brokers to be held accountable for their actions.

Currently, FHA requires mortgagees to have a minimum net worth of $250,000 in order to be qualified to underwrite FHA loans.  Brokers must have a net worth of $63,000.  MBA believes that both standards should be increased to make these industries more accountable.

Specifically, we recommend that mortgage bankers should have a minimum corporate net worth of the greater of $500,000 or 1 percent of FHA loan volume up to a maximum of $1.5 million.  Mortgage brokers should have a minimum corporate net worth of the greater of $150,000 or half of one percent of FHA loan volume up to the minimum for mortgage bankers.  MBA supports mortgage bankers and brokers maintaining a bond sufficient to provide reasonable protection to consumers and taxpayers. 

Finally, Congress needs to address FHA’s loan limits, which are scheduled to drop significantly on January 1.  Under the economic stimulus bills, FHA’s loan limits were increased.  These measures have worked, as evidenced not only by FHA’s overall market share, but by its reemergence in high-cost areas of the country like California, the Northeast, and right here in the DC area.  But markets crave certainty, and this is not the time to be reducing loan limits.  MBA supports permanently raising FHA’s loan limits to $625,500, and allowing it to go to $729,750 in high-cost areas.

MBA appreciates all that FHA and Ginnie Mae are doing to provide stability, liquidity and affordability during this difficult time in the housing finance market.  Now is the time for Congress to improve resources for these agencies in order to prevent problems from occurring.  MBA stands ready to work with you to enhance and sustain FHA and Ginnie Mae now and in the future.  Thank you."

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The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,400 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA's Web site:  www.mortgagebankers.org.