[StBernard] Committee Approves FHA Reform Act

[Westley Annis]

April 27, 2010                                                    

 

 

Committee Approves FHA Reform Act

 

Washington, DC - Today, the House Financial Services Committee approved
legislation to ensure that the Federal Housing Administration (FHA) remains
viable and continues its mission of insuring mortgage loans.

 

Congresswoman Maxine Waters (D-CA), Chairwoman of the Housing and Community
Opportunity Subcommittee, drafted the FHA Reform Act of 2010 (H.R. 5072) in
response to recent events that caused FHA's reserves to fall below the two
percent level required in law.  The Act will empower FHA to improve its
financial position by allowing the agency to adjust its premium structure
for new borrowers, while still providing affordable mortgage insurance to
the individuals FHA is intended to serve including low-income and minority
borrowers and individuals in traditionally underserved areas.

 

FHA has filled a vital role in the nation's economy, helping 37 million
Americans attain homeownership since 1934 and providing crucial insurance at
a time when the private market has pulled back from the mortgage market.

 

"The economic crisis that started a couple of years ago and declining home
prices have caused FHA's capital reserves to deteriorate in recent months,
but under the leadership of Secretary Shaun Donovan and FHA Commissioner
David Stevens, FHA has taken unprecedented administrative and regulatory
steps to improve risk management and root out bad actors participating in
the program," Congresswoman Waters said.  "This legislation makes essential
reforms to strengthen FHA's finances." 

 

H.R. 5072 also provides FHA with enhanced authority to terminate lenders'
approval to originate or underwrite loans backed by FHA insurance when FHA
finds evidence of fraud or noncompliance.  Such enhanced authority is
needed, particularly in light of the recent cases of Lend America and Taylor
Bean and Whitaker, who perpetuated fraud schemes spanning many years.

 

In addition, Congresswoman Waters' legislation requires FHA to improve its
internal reporting systems to better manage risk and to provide transparent
data to the public and to Congress.  This includes improving monitoring of
early defaults and claims, tracking mortgage information by loan servicer,
providing FHA with the ability to contract out for additional credit risk
analysis, requiring mortgagees to report to FHA when they stop buying loans
from other mortgagees and requiring a Government Accountability Office study
on FHA and Ginnie Mae.  The bill also creates a new Deputy Assistant
Secretary at FHA for Risk Management and Regulatory Affairs.

 

Congresswoman Waters drafted the legislation after conducting three hearings
on FHA in the last six months.

 

H.R. 5072 has the support of a diverse group of organizations including the
National Urban League, the National Council of La Raza, the National
Community Reinvestment Coalition, the Mortgage Bankers Association, the
National Association of Realtors and the National Association of Home
Builders.

 

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