Rep. Frank: Possible FHA Exemption in New Subprime Bill

House Financial Services Committee chairman Barney Frank, D-Mass., might be open to exempting certain Federal Housing Administration loan products from his subprime mortgage bill. Rep. Frank told the National Low Income Housing Coalition conference that he wants the bill to restrict subprime lending and increase FHA lending. FHA currently insures one-year adjustable rate mortgages and hybrid ARMs. The subprime lending bill (H.R. 1728) requires lenders that originate ARMs to retain 5% of the credit risk when the loans are sold or securitized. When asked about ARMs, Rep. Frank said FHA will have to be "more cautious" but added that ARMs are not a "problem for people in upper incomes." He also noted that FHA will have stronger debarment powers to deal with bad lenders. "We will be talking with FHA," Rep. Frank told reporters after speaking at the NLIHC Washington conference. He wants the committee to mark up H.R. 1728 next week or the week after.