FHA Reform Act of 2010

Floor Speech

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Ms. BEAN. Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, the amendment I am here to talk to my colleagues about today protects taxpayers and increases government accountability while preserving a critical program that has helped 37 million Americans become homeowners since 1934.

My amendment requires HUD and the FHA to conduct annual comprehensive assessments and considerations for increased minimum down payment requirements in the FHA mortgage guarantee program and grants the FHA greater authority to do so.

Currently, the minimum cash investment requirement, commonly referred to as the ``down payment requirement,'' is set at 3.5 percent. HUD has used its existing authority to propose a 10 percent down payment requirement for borrowers with credit scores below 580, and I applaud FHA Commissioner Stevens and HUD for this important step to protect taxpayer dollars.

However, it's important for HUD to be given clear direction on evaluating future down payment increases as data suggests that the foreclosure crisis is not yet over.

According to core logic, approximately one in four borrowers are underwater in their mortgages, which means they owe more than their house is currently worth. As borrowers become increasingly underwater, they lose incentive to continue to pay their mortgage, which can lead to delinquency and further foreclosures.

While it is difficult for individual homeowners to guard against large swings in the housing market, one important tool for preventing negative equity is to require a meaningful down payment. To make sure HUD is setting down payment requirements for the FHA program that will sufficiently protect the Federal Government from excessive defaults, my amendment requires HUD to submit an annual report to Congress regarding proposed or actual increases. The report would require HUD to analyze the impacts that they would have on the financial soundness of the Mutual Mortgage Insurance Fund--which is the reserve fund referenced frequently in today's debate--also the effect on the housing finance market of the United States and the number of borrowers served by the FHA program.

The amendment requires HUD to consider the findings of these annual reports in determining whether higher down payment requirements are warranted. In addition, it grants authority to HUD to establish requirements for all borrowers or a class or classes of borrowers, and it directs HUD to consider a borrower's credit score when making these decisions.

Combined, this amendment will mandate HUD to evaluate resetting down payment requirements every year, and it will ensure the Federal Government is effectively protected from unnecessary risk. This amendment allows Congress to protect taxpayers without being overly prescriptive or handcuffing the FHA with specific terms. Instead, it provides the FHA the authority to make fact-based decisions based on the level of defaults and market conditions.

We learned from the current mortgage crisis that the FHA needs the data and the flexibility to address changes in today's more dynamic and diverse mortgage market and to protect taxpayers. We also recognize the importance of preserving access to affordable mortgages for millions of American families. FHA has helped Americans attain home ownership and has provided crucial mortgage insurance at times when the private market has pulled back from the mortgage market.

This legislation well-complements the consumer and taxpayer protections in the Wall Street reforms Congress is moving towards final passage.

I urge my colleagues to support the Bean amendment and the underlying bill.

I reserve the balance of my time.

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Ms. BEAN. Well, first of all, it's mandating it. They have to evaluate the facts every year and then propose to Congress why they are or aren't making changes. So that's different than what they've been required to do in the past.

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