The American Bankers Association supports some reforms to the FHA single-family program proposed by House Financial Services Committee chairman Jeb Hensarling, R-Texas, but not when it comes to rolling back the 100% federal guarantee in FHA-insured loans.
The bill known as the Protecting American Taxpayers and Homeowners Act calls for targeting FHA loans at first-time homebuyers and low- and moderate-income borrowers. It also raises the downpayment requirement to 5% from 3.5% and gives FHA more flexibility in setting premiums, including the authority to charge risk-based premiums.
But the ABA and others are concerned the PATH Act goes too far by reducing the 100%
“It is our view that with appropriate downpayment amounts, more prudent underwriting standards and reasonable premiums for the insurance being provided, there is no reason not to continue full insurance coverage of FHA loans,” according to the ABA’s top lobbyist James Ballentine.
“Further, given the retargeted role envisioned by the bill for FHA to be targeted primarily to first-time and low- and moderate-income borrowers, it is appropriate for the program to provide full insurance coverage as a public policy matter to encourage lending to qualified borrowers in this market segment,” the July 22 ABA letter says.
The ABA along with the National Association of Home Builders and National Association of Realtors are also concerned that the Hensarling bill would wind down Fannie Mae and Freddie Mac over five years and eliminate all government guarantees on conventional mortgages.
“The PATH Act goes too far in dismantling the current housing finance system and diminishing the FHA’s support for single and multifamily mortgage liquidity,” according to NAHB’s chief lobbyist James Tobin.
The NAR is urging committee members to vote no on the PATH Act unless the committee makes significant changes to the GOP measure, which is strongly opposed by Democratic members.
“We believe a government guarantee is necessary to create stability in housing finance markets, and to ensure the continued availability of 30-year fixed-rate mortgages for all qualified borrowers—not just those with a high downpayment and very high credit score,” the Realtors say in letter to chairman Hensarling.
“Furthermore, we believe FHA has been making significant changes to address the problems that it has experienced and does not need to be restructured in the manner proposed by the act; instead, FHA needs the authority to undertake reforms it knows are needed to strengthen its financial footing,” NAR president Gary Thomas says in the July 23 letter.
House Financial Services Committee members started debating the merits and flaws of the GOP housing reform bill at a markup session Tuesday morning. But the committee had not started the amendment process as this story was filed.
