Mortgage bankers and the Obama administration praised House passage of legislation to reform the Federal Housing Administration. But lenders cautioned the Senate not to include provisions in companion legislation that would stifle the FHA market.
The U.S. House of Representatives has passed H.R. 5072, the FHA Reform Act of 2010, the U.S. Department of Housing and Urban Development announced Thursday. The vote was nearly unanimous: 406 – 4.
HUD said that the legislation would allow a reform of FHA insurance premiums by moving up-front costs to annual premiums. HUD said this move will increase FHA capital reserves, reduce risk to the FHA insurance fund and cushion the impact on borrowers.
Provisions of the bill reportedly improve FHA loan performance and capital reserves while supporting a recovery of the broader housing market.
Mortgage bankers quickly applauded the bill’s passage.
“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,” Mortgage Bankers Association Chairman Robert E. Story Jr. said in a statement yesterday.
In HUD’s statement, HUD Secretary Shaun Donovan praised House members for passing the bill, “specifically, Housing and Community Opportunity Subcommittee Chair Maxine Waters, Financial Services Committee Chair Barney Frank and Subcommittee Ranking Member Shelley Moore Capito.”
MBA’s Story additionally praised provisions in the bill that increase FHA multifamily loan limits for buildings with elevators in extremely high cost areas. The trade group noted that such an increase will help improve financing for construction and refurbishment of affordable rental housing in urban areas.
Story cautioned that any corresponding Senate legislation should “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.”
