Senate Banking Committee leaders are planning to mark up and vote on a bipartisan FHA reform bill next week that has been endorsed by HUD and many housing groups.
The bill gives the Federal Housing Administration more authority to police lenders and manage risk to the FHA single-family program, according to Senate Banking Committee chairman Tim Johnson, D-S.D.
“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,” Johnson said at a Wednesday hearing on the bill. The chairman drafted the measure with Sen. Mike Crapo (Idaho), the ranking Republican on the committee.
FHA commissioner Carol Galante testified in support of the Johnson-Crapo bill. But she noted that the bill does not give her agency the authority to transfer servicing to another servicer. Industry groups have opposed the transfer of servicing assets, because it could cause financial harm to the servicer.
“Let me be clear, we are not talking about transferring the actual servicing rights,” Galante said, when a servicer is doing a poor job of loss mitigation.
FHA wants the authority to order servicers to transfer pools of loans to subservicers that specialize in loss mitigation. She noted that some servicers are doing this voluntarily.
“This is a common practice outside of FHA right now,” Galante testified. These servicing transfers produce better results in keeping borrowers in their homes and could reduce losses to the FHA insurance fund.
The Senate FHA reform bill largely builds on a FHA reform bill the House of Representatives passed last year by a 402-7 vote. It gives FHA more flexibility so it can continue to manage its single-family program and rebuild its capital reserves.
However, the House Financial Services Committee under chairman Jeb Hensarling, R-Texas, has approved a new
The House committee approved the bill known as the Protecting American Taxpayers and Homeowners Act by a 30-27 vote Wednesday. The PATH Act also calls for winding down Fannie Mae and Freddie Mac and liquidating the GSEs at the end of five years.
“The committee's approval of the PATH Act institutes policies that responsibly wind-down the taxpayer-owned giants, concentrate on FHA’s core mission to help low- to moderate-income home buyers, and cultivate private market interest in the secondary mortgage market,” said Rep. Patrick McHenry, R-N.C.
