Senate Passes FHA Reform

The Senate has passed a Federal Housing Administration modernization bill by a 93-1 vote that raises the FHA loan limit to $417,000 in high-cost areas and lowers the minimum downpayment requirement from 3.0% to 1.5%.During the debate, Sen. Tom Coburn, R-Okla., withdrew his amendment to restore a cap on the number of reverse mortgages the FHA can insure. An amendment to place a moratorium on the implementation of risk-based pricing at the FHA was agreed to by unanimous consent. The moratorium is a blow to the Bush administration, which contends that risk-based pricing is critical to the health of the FHA mortgage insurance fund. Meanwhile, mortgage lenders say they expect the increase in the FHA loan limits to lead to an explosion in FHA originations. The House passed an FHA bill earlier this year, which means House and Senate banking committee leaders will have to meet in conference to agree on the final provisions of the FHA bill. A House-Senate conference is not expected until early next year.