| House Passes FHA Reform Bill | Sorohan, Mike
The House passed a bill yesterday aimed at giving FHA greater flexibility in its finances and the ability to modernize its infrastructure. The Mortgage Bankers Association hailed the bill's passage, calling it "common sense reform" that will provide FHA with stability in a countercyclical economy.
H.R. 5072, the FHA Reform Act of 2010, passed yesterday by a 406-4 vote. Sponsored by Reps. Maxine Waters, D-Calif., Shelley Moore Capito, R-W.Va., and Barney Frank, D-Mass., the bill would permit FHA to raise annual premiums from 0.55 percent to 1.55 percent; create a permanent position of Deputy Assistant Secretary for Risk Management and Regulatory Affairs at FHA; apply indemnification provisions to all Direct Endorsement lenders; and permit FHA to suspend a lender nationwide on the basis of the performance of one of its regional branches.
MBA and other industry trade groups had largely supported the bill, noting that FHA has played an increasingly heightened role in the mortgage markets, providing access to affordable credit to borrowers wishing to purchase or refinance a home.
MBA Chairman Rob Story Jr., CMB, issued a statement yesterday praising the House vote.
"FHA is playing a critical role in today's housing market, helping to provide more affordable financing for borrowers looking to purchase or refinance a home,” Story said. “The reforms contained in this bill will help stabilize FHA's finances by allowing the agency to raise its annual premiums and better take corrective action against lenders who are putting the program at risk.”
Story said MBA was particularly pleased that the House approved an amendment from Reps. Anthony Weiner, D-N.Y., and Gary Miller, R-Calif., that increases FHA loan limits for elevator properties in extremely high-cost areas.
“One of MBA's top legislative priorities, increasing the multifamily limits in this way, will help lenders finance the construction and refurbishment of much-needed affordable rental housing in many urban areas of this country,” Story said.
HUD Secretary Shaun Donovan also commended the House. "The FHA is playing a vital role in the current housing market. We must remain mindful that qualified, responsible families need continued access to affordable homeownership options,” he said. “The changes that we are implementing coupled with this bill will ensure that FHA can continue to serve as a bridge to economic recovery and that mortgage financing remains available until private capital returns.”
Last November, an independent actuarial report found that FHA’s reserves had fallen well below its congressionally mandated statutory requirements. FHA proposed to raise its annual premiums, saying it would provide more stablity to FHA's books while decreasing its upfront premium requirements. MBA supported the move, noting that "r aising premiums is never desirable, but if done prudently, and if coupled with decreases in the upfront premium, this step has the potential to strengthen FHA’s books while actually lowering closing costs for many borrowers.”
Additionally, MBA said while it understood that the bill’s sections dealing with lender enforcement and loan indemnification address important areas, it cautioned that final legislation "needs to ensure that responsible lenders are not discouraged from participating in the FHA program.”
The House rejected several amendments yesterday that MBA and other trade groups said would have diluted the bill's effectiveness, including an amendement by Rep. Scott Garrett, R-N.J., that would have raised FHA’s downpayment requirement. MBA had argued that the amendment would have done little to strengthen FHA’s capital reserve ratio anc could actually disenfranchise more than 300,000 responsible homeowners.
Another amendment, by Rep. Tom Price, R-Ga., would have limited FHA’s market share to 10 percent of the housing finance market. MBA and other trade groups said the amendment would have hampered FHA's ability to serve the housing market in economic countercycles, which it was designed to do. The amendment failed.
Another amendment by Rep. Michael Turner, R-Ohio, would have reduced FHA loan limits, which MBA and other trade groups said would have a "significant impact on the recovery of many housing markets and the overall liquidity of the mortgage industry." The amendment failed.
The Senate does not yet have a companion bill introduced. Story called on senators to move on such a bill.
"We hope the Senate will be empowered by the House action and will consider similar legislation quickly,” Story said. “When it does, we hope it will adopt the House language on multifamily loan limits and that senators will work to keep a careful balance that will allow FHA to address lender enforcement and loan indemnification without discouraging responsible lenders from participating in the FHA program." |