The House overwhelmingly approved legislation today authored by U.S. Representative Judy Biggert (R-IL-13th) 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, this March. H.R. 4264 passed the House today by a vote of 402 to 7.
"FHA's declining financial position could cost taxpayers millions, and it threatens the stability of our housing market," said Biggert. "We cannot afford another Fannie- and Freddie-style bailout, and mortgage holders don't need any more market uncertainty driving down their home values. This legislation will give HUD Secretary Donovan emergency tools to protect the solvency of the FHA. It allows the FHA to enforce stronger loan standards and crack down on bad lenders.
The FHA 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:
* Give the Department of Housing and Urban Development (HUD) authority to charge up to a maximum premium of 2.05 percent annually on mortgage insurance;
* Establish a minimum annual premium for mortgage insurance of 0.55 percent;
* 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.
"The FHA -- along with Fannie and Freddie -- continues to dominate the mortgage market, and that puts taxpayers at risk every time something goes wrong," said Biggert. "This legislation implements several common-sense measures, many of which were requested by the FHA, to halt the insurance fund's decline. I appreciate the bipartisan support we received on the House floor, and I look forward to working with my colleagues in the Senate to send this bill to the President."