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Lending

FHA bill to boost MIP caps moves forward in House

A House committee voted unanimously to pass a bill that looks to give a boost to the Federal Housing Administration through increased mortgage insurance premium caps and other changes.

The FHA, under the bill, could charge up to 2.05% for its annual mortgage premium, up from a current 1.55% maximum. It also sets a minimum of 0.55% for the yearly payment.

Those premiums are set to rise by 10 basis points in April to 1.2% for new mortgages, or 1.25% for loans with a loan-to-value ratio above 95%. That increase stems from a December law that temporarily extended a payroll tax cut.

The House Financial Services Committee agreed to the bill, H.R. 4264, by voice vote Tuesday, more than a month after approval by a subcommittee.

“These are commonsense, targeted changes that would ensure accountability and financial stability within the FHA,” said the bill’s sponsor, Rep. Judy Biggert, R-Ill.

The Department of Housing and Urban Development could also force lenders to pay HUD back if a loan goes bad and it finds fraud or misrepresentation in the underwriting process.

The bill, at the same time, calls into question the fiscal solvency of the FHA, specifically its insurance premium reserve fund.

The FHA would have to submit an “emergency capital plan” regarding its financial security, including whether it would have to dip into Treasury Department funds. The bill also requires the FHA to review its actuarial report process, or assessment of the insurance fund, to verify its accuracy.

The mortgage insurance fund fell to 0.24% in 2011, below the required 2% threshold.

The committee rejected two amendments to the bill that would have lowered the FHA insurance guarantee to 80% from 100% of a loan balance, and require the agency to max out its premiums until it meets that 2% requirement.

In debate, Rep. Barney Frank, D-Mass., said he’d “hate to see” controversial amendments to an otherwise bipartisan measure.

“At this point, to send a jolt to the housing market I think is a mistake,” Frank said.

The FHA bill moves to the floor of the House for consideration.

ascoggin@housingwire.com

@AScoggin

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