Leaders of the House Financial Services Committee are working toward a mark-up of a Federal Housing Administration reform bill by the end of this month, possibly May 24, sources say.The FHA reform bill, co-sponsored by Reps. Bob Ney, R-Ohio, and Maxine Waters, D-Calif., would eliminate the FHA 3% downpayment requirement so FHA borrowers could get a low- or no-downpayment loan under a new risk-based premium structure. The bill (H.R. 5121) is based on a Bush administration proposal to modernize the FHA single-family program, provide safer and lower-cost loan products for subprime borrowers, and gain back market share for the 70-year-old mortgage insurance program. The FHA's market share has been declining for years, and only 3% of homebuyers use FHA loans today. Originations for the first six months of fiscal year 2006 (ending March 31) totaled $25.4 billion, down 25% from the level recorded a year earlier. And its shrinking insurance portfolio has pushed up the FHA default rate to 7.16%.

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