House Passes ARM Limit Hike Bill

Legislation that would expand the availability of government-insured adjustable-rate mortgages was unanimously passed by the Housing subcommittee Thursday.The American Homeownership Act (H.R. 3899) -- sponsored by Rep. Rick Lazio, R, N.Y. -- must now be approved by the full Banking Committee before it reaches the House floor. The Banking Committee has not yet scheduled a date for a mark-up, but nothing will occur until after Congress returns from its August recess in early September. The Lazio bill would raise to 40% from 30% the annual cap on ARMs insured through the Department of Housing and Urban Development, with fixed-rate mortgages accounting for the balance. Currently, ARM commitments cannot exceed 30% of HUD's total insurance volume from the previous year. HUD stopped insuring ARMs in April after reaching the cap. The limit increase can only be implemented at the discretion of the HUD secretary, who must first submit a written request to Congress. HUD must increase the insurance premium on ARMs issued over the 30% limit. The bill also mandates inspections on FHA home purchases and places a $12 billion cap on the amount of reverse mortgages that the government can insure.