Hearing of the Senate Banking Committee - FHA Solvency Act of 2013

Hearing

"Thank you, Commissioner Galante, for joining us today to provide your insights and reaction to the FHA Solvency Act discussion draft Ranking Member Crapo and I have released. I want to thank Ranking Member Crapo and his staff for working with me and my staff on this bipartisan legislation. I would also like to thank Senator Brown, Senator Menendez, and Senator Vitter for their earlier efforts to provide the FHA with additional tools and flexibility.

"Earlier this year, Ranking Member Crapo and I agreed that addressing the stability of the FHA's finances would be first on our housing agenda, followed closely by a broader housing finance reform effort. Like our FHA bill, we will seek the input of all the members of the Committee to reach similar bipartisan agreement on housing finance reform legislation in the coming weeks and months. To that end, I would encourage the Committee to focus on the stability of the FHA during today's hearing.

"The FHA serves a critical role in our housing market by insuring affordable, well-documented and underwritten mortgages for families across the country. That insurance maintains liquidity in the mortgage market during a recession, fulfilling the FHA's countercyclical mission. Without the FHA, the housing crisis would have been much deeper -- by as much as 25 percent -- because mortgage credit would not have been available to most qualified borrowers.

"While the FY 2012 Actuarial Report projected a negative capital ratio for the M-M-I Fund, recent data show the weakest books of business -- the years 2006 through 2009 -- are stabilizing, and the most recent data show serious delinquency rates falling since the report was released. These improving trends contribute to the future stability of the FHA, and the bill that Senator Crapo and I have drafted would provide the FHA with tools to strengthen its finances and maintain stability into the future.

"The FHA Solvency Act of 2013 would provide the FHA with many of the tools Secretary Donovan requested in HUD's 2012 Report to Congress and in his testimony before this Committee. Our discussion draft would better equip the FHA to hold lenders accountable for fraud or inappropriate loans. The bill would also require annual reviews of loan performance and premium levels to ensure that pricing and underwriting standards are appropriate.

"Commissioner Galante, I would like you to give us greater insight into how these tools and the other provisions of the bill will help stabilize the MMI Fund, and strengthen the program for current and future homeowners. I look forward to continuing to work with you, Senator Crapo, Members of the Committee, and all stakeholders as we proceed to a markup of this important bill next week. I am encouraged by the positive response the bill has received from the National Association of Realtors, the Mortgage Bankers Association, and the Mortgage Insurance Companies of America, and I hope the Committee can move swiftly to approve this legislation."

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