U.S. Senator Bob Corker, R-Tenn., a member of the Senate Banking, Housing and Urban Affairs Committee, said today he is pleased the Federal Housing Administration is following through on steps Corker requested to get FHA back to solvency.
In December, Corker secured a commitment from FHA Commissioner and Assistant Secretary for Housing Carol Galante 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 am pleased that the FHA is following through on the steps we discussed last year to strengthen its fund and to get itself back to solvency, but this is only a first step in fundamentally reforming our system of housing finance so that we are not completely reliant on the government -- and on taxpayer losses -- to support homeownership," said Corker.
Galante sent Corker a letter on December 18th committing unequivocally to the following important reforms to be put in place by January 31, 2013. Today, the FHA:
* Announced the curtailment of the popular fixed rate reverse mortgage program, the source of outside losses at FHA over the past few years;
* Established a manual underwriting requirement for loans with credit scores below 620 and debt-to-income ratios above 43 percent; and
* Established a 5 percent down payment requirement for mortgages in excess of $625,500.
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.