WASHINGTON-The odds may be against them, but mortgage industry groups are staging a major push to pass a standalone Federal Housing Administration reform bill before the Senate adjourns Aug. 7 for a month-long recess.
Sens. Mark Begich, D-Alaska, Sherrod Brown, D-Ohio, and David Vitter, R-La., are sponsoring the FHA bill (H.R 5072), which has already passed the House by a 404-4 vote.
With bipartisan support, it may be possible to get the Senate to pass the measure by unanimous consent, but it takes only one vote to kill it.
The reform bill gives the FHA mortgage insurance program more flexibility to adjust its premium structure and help rebuild the insurance fund's capital reserves. It also strengthens the agency's hand in getting lenders to indemnify FHA for bad loans and to terminate mortgage firms with excessive early default rates.
Nine trade groups along with the U.S. Conference of Mayors and National Association of Counties are urging the Senate to act quickly. They claim passage is needed to replenish the capital reserves of the FHA mortgage insurance fund that have "fallen dramatically" due to loan defaults and foreclosures.
"Without the financial reforms in H.R. 5072, the chances will be much greater that this shortfall will land on the backs of taxpayers. The Congressional Budget Office estimates passage of this legislation will decrease federal spending by $2.5 billion over the next five years," a joint letter to Senate leaders says.
The bill allows the HUD secretary to increase the FHA annual premium up to 1.5% from 0.55%. Passage would allow the agency to restructure its upfront and annual premiums in a way that benefits borrowers and the FHA insurance fund, according to HUD officials.
If the bill is passed by the Senate, the FHA can reduce its 2.25% upfront premium to 1% and raise the annual premium to 90 bps on single-family mortgages with loan-to-value ratios above 95%.
The change could increase FHA's premium revenue by $300 million a month.
The House and Senate Appropriations Committees have approved separate Transportation-HUD budget bills for fiscal year 2010. Both appropriations bills authorize FHA to increase the upfront premium to 1.5%.
In a letter to Congress, White House officials said they support the Senate appropriations bill, but would prefer to see Senate action on H.R. 5072. The Mortgage Bankers Association also supports quick passage of bill.
MBA chief lobbyist Bill Killmer says it is unclear when and how Congress will pass the appropriations bills.
"I don't think anyone should be under the impression that they are going to move appropriations bills in regular order," he said.
