FHA reform could be bubbling in Senate

WASHINGTON (9/14/07)--A Senate committee may consider next week a bill to reform the Federal Housing Administration (FHA), reports the American Banker newspaper (Sept. 13).

The bill is not yet introduced, but would raise the insurance limit on FHA loans to $417,000 in "high-cost localities," according to the report. It also would reduce the down payment requirement from 3% to 1.5%, and allow the FHA to charge risk-based premiums.

The House already has introduced legislation to reform the FHA.

House Financial Services Subcommittee on Housing and Community Opportunity Chairwoman Maxine Waters (D-Calif.) introduced the Expanding American Homeownership Act of 2007 (H.R. 1852), which would modernize the FHA and give it new tools to help mitigate the effects of the subprime crisis.

The bill would authorize zero down payment loans and raise the FHA loan limit for single-family homes from the current $362,000 ceiling to $417,000.

However, Reps. Barney Frank (D-Mass.), Gary Miller (R-Calif.) and Dennis Cardoza (D-Calif.) plan to offer an amendment on the floor to raise the FHA loan limit to $500,000, according to Credit Union National Association (CUNA) Senior Legislative Representative John Hildreth.

In addition, the House bill allows FHA to insure loans to those deemed less credit worthy, a provision also designed to steer mortgage seekers away from predatory lenders. The bill lowers fees for these individuals.

Credit unions, like other lenders, have been unable to make FHA- insured mortgage loans to its members in states that have high housing costs, said Hildreth.

CUNA favors legislative efforts to empower lenders, such as credit unions, to provide homebuyers alternatives to predatory mortgage products, he said.

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Resource Links

110th Congress: Federal Housing Administration Reform