U.S. Senator Bob Corker, R-Tenn., a member of the Senate Banking, Housing and Urban Affairs Committee, today voted in favor of Carol Galante to be an assistant secretary of Housing and Urban Development and commissioner of the Federal Housing Administration. Prior to announcing his support for Galante, who was confirmed by the Senate today, Corker secured a commitment from her to make substantial changes to FHA underwriting requirements in order to begin restoring financial stability at FHA after substantial losses, primarily from a flawed reverse mortgage program.
"I'm as frustrated as anyone with the losses taking place at FHA and our failure to implement fundamental housing reform, but given Carol Galante's commitment to make important changes that will help return FHA to its original mission of making affordable loans accessible to qualified first-time home buyers, I voted to confirm her as an assistant secretary of housing and FHA commissioner. I look forward to working with her as she puts in place the reforms she has promised as well as others that are needed to get FHA back on track," said Corker. "The steps that FHA has taken thus far are just a beginning, and going forward, I am fully committed to pushing both Congress and the administration to take up and address the critical issue of structural housing finance reform in this country."
Galante sent Corker a letter on December 18th committing unequivocally to the following important reforms to be put in place by January 31, 2013:
* Placing a moratorium on the full drawdown reverse mortgage program to assess its viability after $2.8 billion in losses. This would put a hold on a program that insures reverse mortgages in which people could draw down all of the equity in their homes.
* Substantially increasing underwriting criteria for borrowers with FICO scores between 580 and 620 by establishing a meaningful maximum debt-to-income ratio. This will dramatically decrease borrower default rates.
* Increasing the down payment requirement and the insurance pricing for loans between $625,000 and $729,000 to protect FHA against loss on high balance loans that are outside Fannie and Freddie conforming loan limits. This will also help to scale back the government's footprint in the housing market.
* Increasing underwriting requirements for borrowers who have been foreclosed upon within the last seven years.
Corker has continually expressed concerns over the pace of reforms at FHA, most recently raising several issues with Housing and Urban Development (HUD) Secretary Shaun Donovan at a December 6 banking committee hearing on the state of FHA's financial condition. A transcript of the hearing can be found here. He also continues to work with his colleagues on reforming Fannie Mae and Freddie Mac in order to protect taxpayers from further losses and rebuild the private mortgage market.