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A house subcommittee approved a bill Tuesday that establishes new rules intended to bolster the health of the Federal Housing Administration's mortgage insurance fund.

The bill moves to the House Financial Services Committee.

New rules include setting minimum annual mortgage insurance premiums. As of now, down payments of 5% or more require an annual premium of 1.1% of the borrower's outstanding balance. If below 5%, the minimum premium is 1.15%.

The bill also bars unscrupulous lenders from participating in the FHA program, requires repayment of losses to FHA by lenders who commit fraud and "improves the FHA's internal financial controls, transparency, and disclosure requirements."

“The FHA's cash reserves are down to dangerous levels, and taxpayers cannot afford another Fannie- and Freddie-style bailout,” Rep. Judy Biggert, R-Ill., said in a statement. 

“This administration needs to enforce stronger standards and create room for the private sector to replace taxpayers as the primary source of funding," she said. "The FHA is facing an urgent fiscal crisis, and this proposal gives HUD Secretary Donovan emergency tools to wind down the risk before it’s too late.”

The Financial Services Committee held three hearings in the past year focused on ways to shore up the financial health of the FHA. 

The FHA insures more than $1 trillion worth of mortgages on more than 7 million loans. An independent auditor’s report released last year found that the agency's finances have deteriorated to the point where it will need a bailout if the housing market worsens.

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