Industry Backs FHA Reform, Rejects Several Amendments

Industry groups are urging House lawmakers to pass a Federal Housing Administration reform bill while rejecting several amendments that would lower the insurer's loan limit to $500,000, reduce its market share to 10%, and increase downpayments. "We urge you to oppose these amendments that will only hamper this important program," according to a joint letter signed by the Mortgage Bankers Association, National Association of Home Builders, and National Association of Realtors. The House is about to begin debate on the bill (H.R. 5072) which would give FHA more flexibility in adjusting its mortgage insurance premium structure. The measure also strengthens the agency's hand in getting lenders to indemnify FHA for bad loans and to terminate lenders with excessive early default rates. Industry groups oppose an amendment by Rep. Scott Garrett, R-N.J., that would increase the FHA 3.5% minimum downpayment to 5% and prohibit closing costs from being rolled into the loan amount. The Garrett amendment is expected to be voted down. An amendment by Rep. Melissa Bean, D-Ill., that requires FHA to report annually on its downpayment policy discussions is expected to pass. FHA currently has a market share of 30% and Rep. Tom Prices, R-Ga., is offering an amendment to cap it at 10%. Rep. Michael Turner, R-Ohio, wants to reduce the agency's maximum loan limit to $500,000 from $720,000. Industry groups contend the amendment would be disruptive and hurt the housing recovery. Meanwhile, real estate, apartment and low-income housing groups are supporting an amendment by Reps. Anthony Weiner, D. N.Y, and Gary Miller, R-Calif., that increases the FHA multifamily loan limit for elevator properties in high-cost areas. The House is expected to vote on final passage of H.R. 5072 Thursday.