The Federal Housing Administration's legislative and regulatory agenda to bolster its depleted insurance fund and tighten underwriting standards continues to be a work in progress.
Back in January, FHA commissioner David Stevens began talking about a legislative proposal to give the agency more flexibility in setting premiums, including a hike in annual charges.
The House eventually passed a bill, allowing the FHA to adjust its premium structure but Senate action is still in doubt.
Meanwhile, the FHA is starting the rulemaking process with an eye toward reducing defaults and losses to the insurance fund using tighter underwriting guidelines.
A few days ago the agency published a Federal Register notice, seeking public comments on cutting seller concessions in half and increasing the 3.5% downpayment requirement to 10% for borrowers with less than 580 credit scores. The FHA also wants to tighten its standards for manually underwritten loans.
"These are the latest in a series of changes to allow the FHA to manage its risk better while continuing to support the nation's housing recovery," Stevens said.
The National Association of Realtors is likely to raise objections to cutting seller concessions from 6% to 3% on existing homes.
The National Association of Home Builders is surveying its members on seller concessions to see how many builders use them to cover closing costs or "buy down" the mortgage rate to facilitate sales of newly constructed homes.
"We want to strike a balance of what can be done to help buyers in a safe and sound manner. We will be making some recommendations," said David Ledford, NAHB senior vice president for housing finance.
Meanwhile, industry groups are mounting a lobbying effort to get the Senate to take up and pass a FHA reform bill this year.
"It is a broad coalition," which includes the Realtors, homebuilders and banking trade groups, said Mortgage Bankers Association chief lobbyist Bill Killmer.
The MBA's new lobbyist said "progress is being made" to get Democratic and Republican senators to co-sponsor the FHA reform bill.
But time is not on their side. There are few legislative days left this year with the August recess looming and the elections coming up in November. In addition, the Senate leadership has other priorities.
MBA's new lobbyist warned that it is going to be a "heavy lift" to pass it. But the FHA and the White House are "pushing hard" for the bill, Killmer said.
