Senate Passes VA-HUD Bill

The Senate has passed the VA-HUD appropriations bill that authorizes the Federal Housing Administration to create a subprime mortgage insurance program and provides the Office of Federal Housing Enterprise Oversight with additional funding.The Bush administration supports both provisions, but House appropriators explicitly rejected the creation of an FHA subprime program -- which is expected to be an issue when House and Senate leaders meet in conference to iron out a final bill. Under the Senate bill, the FHA could require subprime borrowers to make higher downpayments and pay higher insurance premiums than current FHA borrowers. However, the FHA could reduce the insurance premiums if the borrower develops a good payment record. "The administration appreciates that the [Senate] funded the Department of Housing and Urban Development at the president's requested levels and provided for a new FHA product that will create homeownership opportunities for more families with poor credit records," the Office of Management and Budget said. The Senate bill also provides $7.5 million in additional funding for OFHEO, which the administration requested, to cover the costs of the agency's investigations into Fannie Mae's and Freddie Mac's accounting problems and to hire more examiners.