Frank Revamping FHA Reform Bill

The next chairman of the House Financial Services Committee wants to restructure a Federal Housing Administration reform bill so that riskier borrowers don't have to pay higher mortgage insurance payments.Rep. Barney Frank, D-Mass, who is virtually certain to be the next chairman of the panel, said he is working on a bill that raises the FHA loan limit to the median house price in high-cost areas and allows the FHA to serve riskier subprime borrowers. Rep. Frank estimated that the FHA, by serving richer communities, will generate more revenues that can be recycled to cover the higher loan-loss rates associated with subprime lending. As a result, the FHA borrowers won't have to pay risk-based premiums. It would make money for the FHA or be a "wash," Rep. Frank told a Women in Housing and Finance symposium. He also told reporters that the FHA loan limit would be similar to a proposal in a House-passed government-sponsored enterprise reform bill that raises the Fannie Mae and Freddie Mac loan limit to the median house price in high-cost areas. The GSE bill caps this increase at 150% of the current conforming loan limit.