MAR 25, 2013 1:01pm ET

AAF & Progressive Policy Institute Offer FHA Reform Guidelines

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As the debate over the future of the Federal Housing Administration heats up in Congress, more common ground solutions are emerging.

Among others, the American Action Forum and Progressive Policy are calling for legislative action that creates “a more transparent reporting system” that will show how the FHA “is returning to its congressionally mandated capital requirement.”

Other “common-sense guidelines” for FHA reform outlined in a joint paper released last Friday include, “assessing the FHA’s programs on a fair value basis.”

According to the paper, the goal is to ensure a more adequate, longer term pricing of the financial risk, since the risk FHA takes on through its guarantees “may ultimately cost taxpayers.”

Hence reform should “move to confine FHA lending strictly to helping first-time homebuyers from low-to-middle income families.”

Authors Jason Gold, PPI senior fellow and director of the “Rebuilding Middle Class Wealth” project, and AAF’s director of housing policy, Andrew Winkler, stress that the debate will benefit from a discussion about the tools the FHA needs immediately “to bolster the finance state of the Mutual Mortgage Insurance Fund and assess the FHA’s role in housing finance moving forward.”

In addition, they wrote, the reform should “clarify the division of labor” between the FHA and the government-sponsored enterprises in times when the mortgage banking system is “dominated by government backed lending.”

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