Despite the support of the Bush administration, conferees working on an omnibus appropriations bill kicked out a Senate provision that would have authorized the Federal Housing Administration to start a subprime mortgage insurance program."The conferees support efforts to assist low-income persons in repairing negative credit histories where appropriate," the conference report says. "However, the Department of Housing and Urban Development needs to stem the escalating default rate in FHA's single-family mortgage insurance programs before it assumes new risks posed by persons with credit problems." The FHA default rate (loans 90 days or more past due) was 5.76% in August. The FHA subprime initiative first surfaced as part of the president's fiscal year 2004 budget proposal that was released in early February. "The proposal will create new homeownership opportunities for more families with poor credit records who are served at a higher cost in the subprime market or not at all," according to budget documents. The Senate included the FHA subprime initiative in its version of the HUD appropriations bill, but House appropriators rejected it. The Senate and the House are scheduled to return the week of Dec. 8 to vote on the omnibus appropriations bill, which includes funding for HUD.

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