U.S. Representative Judy Biggert (R-IL-13th) today secured approval of the House Committee on Financial Services for legislation she authored to prevent the Federal Housing Administration (FHA) from edging closer to insolvency. Biggert, who chairs the Subcommittee on Insurance, Housing, and Community Opportunity, introduced H.R. 4264, the FHA Emergency Fiscal Solvency Act of 2012, after her subcommittee approved an initial draft on February 7th. The full Committee approved her bill today by voice vote.
"The financial condition of the FHA continues to decline, threatening the stability of our housing market and taxpayers," said Biggert. "We cannot afford another Fannie- and Freddie-style bailout. This Administration needs to enforce stronger standards and create room for the private sector to replace taxpayers as the primary source of funding. This proposal gives HUD Secretary Donovan emergency tools to protect the solvency of the FHA."
The FHA currently insures more than $1 trillion worth of mortgages on more than 7 million loans. As of November 2011, the FHA's capital reserve fund was estimated at 0.24 percent -- far short of the 2 percent required by statute. Due to deteriorating financial conditions, the Administration's fiscal year 2013 budget projects that the FHA may require $688 million in taxpayer assistance to shore up its financial position. In order to mitigate financial risk within the FHA, H.R. 4264 would:
* Establish minimum annual premiums for mortgage insurance;
* Bar unscrupulous lenders from participating in the program;
* Require repayment of losses to FHA by lenders who committed fraud;
* Improve the FHA's internal financial controls, transparency, and disclosure requirements; and
* Require the GAO to conduct an independent safety and soundness review of the FHA.
"These are common-sense measures, many of which were requested by the Administration," said Biggert. "I appreciate my colleagues on both sides who have offered their support, and I look forward to sending this bill to the President's desk as soon as possible."