The U.S. House of Representatives has passed the FHA Reform Act (HR 5072) in a near unanimous vote of 406-4. The bill enables the Federal Housing Administration (FHA) to reform its current mortgage insurance premium structure by shifting some of the upfront cost to the annual premium—a move that will increase FHA's capital reserves and reduce risks to the FHA insurance fund, while cushioning the impact on the consumer. Further, HR 5072 includes provisions to improve FHA loan performance and capital reserves, while continuing to support the broader housing market and recovery and preserving FHA's role in providing homeownership opportunities to responsible underserved borrowers.
"By passing legislation to strengthen the financial footing of the Federal Housing Administration, Democrats in Congress are continuing our efforts to build a strong new foundation for the American economy," said House Speaker Rep. Nancy Pelosi. "The FHA has helped millions of Americans achieve the dream of homeownership. Today, the House has helped ensure the FHA will continue to be able to do so long into the future, and we have protected consumers by enhancing its authority to go after fraudulent lenders. In keeping with our commitment to fiscal responsibility, this legislation will reduce federal spending and save taxpayers $2.5 billion."
"I am grateful to the members of Congress who worked diligently on this bill—specifically, Housing and Community Opportunity Subcommittee Chair Maxine Waters, Financial Services Committee Chair Barney Frank and Subcommittee Ranking Member Shelley Moore Capito," said HUD Secretary Shaun Donovan. "We look forward to quick action by the Senate on this proposal to encourage responsible homeownership while further reducing risk to the American taxpayer."
A proposed amendment that would have required consumers who purchased a home with a loan backed by the FHA to put more money down was killed. Rep. Scott Garrett also proposed an amendment to HR 5072 that would have increased the minimum downpayment of a home to five percent was also debated, but eventually shot down.
"FHA is playing a critical role in today's housing market, helping to provide more affordable financing for borrowers looking to purchase or refinance a home. The reforms contained in this bill will help stabilize FHA's finances by allowing the agency to raise its annual premiums and better take corrective action against lenders who are putting the program at risk," said Mortgage Bankers Association (MBA) Chairman Robert E. Story Jr., CMB. "We hope the Senate will be empowered by the House action and will consider similar legislation quickly. When it does, we hope it will adopt the House language on multifamily loan limits and that Senators will work to keep a careful balance that will allow FHA to address lender enforcement and loan indemnification without discouraging responsible lenders from participating in the FHA program."