Sen. Bond Sounds Warning on FHA Move

Sen. Christopher Bond, R-Mo., is warning that the passage of a massive housing bill will greatly expand the Federal Housing Administration single-family program and make FHA a "repository for the worst" mortgages. "FHA is going to choke on this and I think it is a recipe for disaster," Sen. Bond said during a markup of the Transportation/Department of Housing and Urban Development appropriations bill. Sen. Bond along with a core group of Republican senators have opposed and dragged out the debate on the housing bill the Senate is expected to pass on Friday. The House of Representatives has passed a similar measure that modernizes the FHA mortgage insurance programs, creates a FHA refinancing program to help 400,000 homeowners avoid foreclosure and strengthens regulation of the housing government-sponsored enterprises. Differences between the House and Senate bills still have to be resolved. Sen. Bond is concerned that 35% of the refinanced loans for at-risk borrowers will go bad. And HUD does not have the staff and expertise to manage FHA's growing market share and higher loan limits. Sen. Christopher Dodd, D-Conn., contends FHA has $18.5 billion in reserves and the performance of FHA loans is improving. "In other words, with its hefty reserves, improving mix of business and the reforms in this bill, we can have confidence that FHA will be safe and sound for many years to come," Sen. Dodd said.