House Okays Key FHA Reforms

The House has passed key Federal Housing Administration reforms advocated by the Bush administration as part of a HUD appropriations bill that is now pending in the Senate.The provisions would increase FHA loan limits, allow the agency to charge risk-based premiums, and eliminate a 3% downpayment requirement. These provisions would get the FHA back into the market so that it could serve borrowers who are being steered into subprime loans, according to Brian Chappelle, an FHA consultant. At a Senate Banking Committee hearing on Tuesday, housing subcommittee Chairman Wayne Allard, R-Colo., said there are a lot of unanswered questions about the FHA's ability to implement risk-based pricing. Only Sen. Mel Martinez, R-Fla., supported the administration's reform efforts. However, it appears that the legislative fight over the FHA reforms will occur in the Senate Appropriations Committee, not the banking committee. Sen. Christopher Bond, R-Mo., is expected to mark up the Department of Housing and Urban Development appropriations bill in mid-July. Meanwhile, Sen. Allard and banking committee Chairman Richard Shelby, R-Ala., have asked the Government Accountability Office to conduct a study on the administration's FHA reform package and recommend the "most viable options FHA can pursue to serve additional low-income and first-time homebuyers."