Senate Raises FHA's Authority to $400 Billion

The Senate has passed an appropriations bill that provides the Federal Housing Administration with authority to insure up to $400 billion of single family loans in fiscal year 2010. Lenders are on track to originate $335 billion of FHA loans in FY 2009, which ends September 30. The Senate also appointed conferees to meet with House appropriators to iron out a final Department of Housing and Urban Development appropriations bill for FY 2010. Like the Senate bill, the House bill provides $400 billion for FHA and $500 billion in commitment authority for Ginnie Mae. The House and Senate differ, however, on how to deal with an $800 million shortfall in the FHA reverse mortgage program. The Senate bill provides $288 million to cover part of the credit subsidy shortfall and instructs FHA to reduce the proceeds on FHA-insured home equity conversion mortgages to cover the rest of the shortfall. The House bill does not provide any funds. The House and Senate appropriators will have to resolve the HECM when they meet in conference. Reserve mortgage lenders are concerned a reduction in loan proceeds will diminish the value of FHA reverse mortgages and cut benefits for seniors.