U.S. Sen. Pat Toomey (R-Pa.) yesterday introduced an amendment to reduce the risk of a taxpayer bailout of the Federal Housing Administration (FHA). This amendment is identical to the FHA Emergency Fiscal Solvency Act of 2012 (H.R. 4264) which passed the House of Representatives overwhelmingly 402-7.
The FHA insures more than $1.1 trillion worth of mortgages on more than 7 million loans, but its capital reserve suffers from a dangerous shortfall. According to the FHA's fiscal year 2012 actuarial study, the FHA is valued at negative $13.48 billion under the rosiest of scenarios and may require a taxpayer-funded bailout to keep it afloat. Sen. Toomey's amendment would institute the following important reforms:
* Increase minimum annual premiums for mortgage insurance and give the Department of Housing and Urban Development discretion to charger a higher premium
* 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
* Require the GAO to conduct an independent safety and soundness review of the FHA
Sen. Toomey has also co-sponsored Sen. David Vitter's (R-La.) FHA Reform Bill (S. 1997) which would implement far-reaching reforms to recapitalize the agency.
"While I hope to see further reforms, this measure is an important first step in modernizing the FHA and protecting taxpayers from another government mandated bailout," Sen. Toomey said. "A companion piece of legislation received wide bipartisan support in the House of Representatives, and I hope we can pass this legislation with the same enthusiastic bipartisan support in the Senate."
Acting FHA Commissioner Carol Galante praised the House-passed FHA Emergency Fiscal Solvency Act:
"We are pleased that the bill passed by the House includes provisions that will allow FHA to continue its efforts to strengthen its enforcement capabilities in order to protect its insurance fund and American taxpayers," Commissioner Galante said. "We look forward to continuing to work with both chambers to enact final legislation to provide FHA with the tools it needs to build on the vital reforms implemented by this administration."