House Passes FHA Reform Act to 'Rebuild the American Dream of Homeownership'
The House of Representatives today passed House Resolution (HR) 5074, the FHA Reform Act, which establishes a handful of new Federal Housing Administration (FHA) regulations and authorities. The FHA insures approved lenders against default-related losses on qualifying mortgages. In addition to strengthening the FHA's capital base by raising mortgage insurance premiums, the bill aims to crack down on FHA-approved lenders. For example, the bill grants FHA the authority to terminate a lender's approval on a national basis due to the performance of regional branches. Representatives passed the bill in a 406-to-4 vote with only one Democrat and three Republicans voting against the bill. The final version of the bill includes "reforms that will rebuild the American dream of homeownership and reduce federal spending by $2.5bn," House Democrats said in a statement, adding that the bill "protects Americans from mortgage fraud and holds the FHA accountable by improving its internal reporting systems and providing greater transparency to the public and Congress." Industry groups are already embracing the bill's aims to maintain the availability of financing in the mortgage market. "The reforms contained in this bill will help stabilize FHA's finances by allowing the agency to raise its annual premiums and better take corrective action against lenders who are putting the program at risk," said Mortgage Bankers Association (MBA) chairman Robert Story Jr, in an e-mail. "Importantly, the bill also contains provisions to increase FHA's multifamily loan limits for elevator buildings and in extremely high cost areas," Story added. "One of MBA's top legislative priorities, increasing the multifamily limits in this way will help lenders finance the construction and refurbishment of much-needed affordable rental housing in many urban areas of this country." Write to Diana Golobay.