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House Hearing Addresses “Critical” FHA Reform

A House Financial Services subcommittee hearing yesterday discussed the future role of the Federal Housing Administration, Ginnie Mae and Rural Housing Service.

Under a draft legislative proposal presented in the hearing before the Subcommittee on Insurance, Housing and Community Opportunity, the Department of Housing and Urban Development would have the authority to disqualify poor quality lenders from participating in the program; an independent chief financial officer for Ginnie Mae and a new Deputy Assistant Secretary for Risk position at FHA would be established; and a 5 percent down payment would be required for all FHA loans.

“The FHA, RHS, and Ginnie Mae play a major role in the mortgage finance market, and reform of these agencies is critical to restoring stability and strength to the housing sector,” said Subcommittee Chairman Judy Biggert. “The Subcommittee will explore reforms to improve their financial condition, enhance lender enforcement tools, and bring private sector capital back into the market. Our goal is to determine a future role for these government mortgage programs that strikes the right balance for taxpayers and homebuyers.”

During the hearing, Mortgage Bankers Association Chairman Michael Berman expressed concerns over the Qualified Residential Mortgage proposal and its impact on the mortgage industry as a whole.

“By making it even more difficult for private capital to re-enter the housing finance market, the QRM rule would lead to FHA being flooded with more, not fewer, loans,” Berman said. “And while FHA has an important role to play, MBA firmly believes that it is not in the public interest for a government insurance program to dominate the market.”

He also addressed the issue of FHA loan limits.”Intense focus has been placed on the narrow slice of loans made at the high end of the spectrum,” he said. “MBA understands that the maximum loan limits are likely to go down to $625,000 on October 1, but we think it would be a mistake to also lower the limits in low-cost areas where FHA does most of its business.”

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Written by Elizabeth Ecker

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