News
The Senate passed legislation today to revamp the Federal Housing Administration's mortgage insurance program to make it available to more borrowers mired in the troubled subprime market. On a 93-1 vote, the chamber approved the bill that is widely supported by the housing industry, which believes FHA expansion will help stabilize a turbulent home market. Sen.
Jon Kyl, R-Ariz., was the lone opponent. The Senate adopted by a voice vote an amendment by Banking Chairman Dodd and ranking member Richard Shelby, R-Ala., that would place a one-year moratorium on a proposed HUD rule to allow FHA to charge different mortgage insurance premiums based on the risk of each loan. It also defeated by voice vote an amendment by Sen. Tom Coburn, R-Okla., that would have delayed lifting the cap on FHA reverse mortgages -- now at $275,000 -- until a GAO study is submitted to Congress on the cost consequences of such a change. Coburn, who had placed a hold on the bill, said he was worried that eliminating the cap could have unintended consequences because all reverse mortgages would likely go to FHA, shutting out the private market. "The crisis is in the mortgage industry, not the reverse mortgage industry. But we are inclined in using that crisis to absolutely ensure in the future that our children are going to be hooked for the guarantee for all the reverse mortgages in this country," Coburn said. Sen. Wayne Allard, R-Colo., noted that the program should be more widely available and added that there are safeguards and counseling requirements in the bill. "The problem is with the perpetrators, not the reverse mortgage products," Allard said.
The Senate measure differs from the version the House passed earlier in the year. The Senate bill would increase FHA loan limits, currently at $362,000, to levels similar to government-sponsored enterprises Fannie Mae and Freddie Mac, which are $417,000. The House bill would raise them higher, to 125 percent of an area's median home price, and give the HUD secretary the discretion to bump up that level by $100,000 during periods of crisis in the home-mortgage market. That provision is supported by some housing groups that argue that FHA has been shut out of places like California because of its high home prices. The Senate measure would lower the down payment requirement to 1.5 percent from 3 percent. The House bill would allow no down payment in some cases. Both bills would lift the cap on FHA reverse mortgages for elderly homeowners, though the House bill would siphon the profits from the change to finance an affordable housing trust fund.
Banking member Charles Schumer, D-N.Y., said he thought the two sides could reconcile their differences quickly. "I think this one will be pretty easy," he said. Schumer and Sen. Jack Reed, D-R.I., indicated that it would be difficult for inclusion of the housing trust fund in a final bill because of GOP opposition, even though the provision is a priority for House Financial Services Chairman Frank. Reed said he supports creation of a housing trust fund, but thought that it would be better attached to legislation that would overhaul Fannie Mae and Freddie Mac oversight. "My sense is that if we can get a housing trust fund arrangement through this FHA mechanism would be healthy, but I think the critical issue here is getting FHA back robustly in the business of providing mortgage guarantees as an alternative to some of these exotic loan products that are out there," Reed said.
Jon Kyl, R-Ariz., was the lone opponent. The Senate adopted by a voice vote an amendment by Banking Chairman Dodd and ranking member Richard Shelby, R-Ala., that would place a one-year moratorium on a proposed HUD rule to allow FHA to charge different mortgage insurance premiums based on the risk of each loan. It also defeated by voice vote an amendment by Sen. Tom Coburn, R-Okla., that would have delayed lifting the cap on FHA reverse mortgages -- now at $275,000 -- until a GAO study is submitted to Congress on the cost consequences of such a change. Coburn, who had placed a hold on the bill, said he was worried that eliminating the cap could have unintended consequences because all reverse mortgages would likely go to FHA, shutting out the private market. "The crisis is in the mortgage industry, not the reverse mortgage industry. But we are inclined in using that crisis to absolutely ensure in the future that our children are going to be hooked for the guarantee for all the reverse mortgages in this country," Coburn said. Sen. Wayne Allard, R-Colo., noted that the program should be more widely available and added that there are safeguards and counseling requirements in the bill. "The problem is with the perpetrators, not the reverse mortgage products," Allard said.
The Senate measure differs from the version the House passed earlier in the year. The Senate bill would increase FHA loan limits, currently at $362,000, to levels similar to government-sponsored enterprises Fannie Mae and Freddie Mac, which are $417,000. The House bill would raise them higher, to 125 percent of an area's median home price, and give the HUD secretary the discretion to bump up that level by $100,000 during periods of crisis in the home-mortgage market. That provision is supported by some housing groups that argue that FHA has been shut out of places like California because of its high home prices. The Senate measure would lower the down payment requirement to 1.5 percent from 3 percent. The House bill would allow no down payment in some cases. Both bills would lift the cap on FHA reverse mortgages for elderly homeowners, though the House bill would siphon the profits from the change to finance an affordable housing trust fund.
Banking member Charles Schumer, D-N.Y., said he thought the two sides could reconcile their differences quickly. "I think this one will be pretty easy," he said. Schumer and Sen. Jack Reed, D-R.I., indicated that it would be difficult for inclusion of the housing trust fund in a final bill because of GOP opposition, even though the provision is a priority for House Financial Services Chairman Frank. Reed said he supports creation of a housing trust fund, but thought that it would be better attached to legislation that would overhaul Fannie Mae and Freddie Mac oversight. "My sense is that if we can get a housing trust fund arrangement through this FHA mechanism would be healthy, but I think the critical issue here is getting FHA back robustly in the business of providing mortgage guarantees as an alternative to some of these exotic loan products that are out there," Reed said.
