Senators Begich, Brown Introduce Legislation to Reform Federal Housing Administration
Legislation Would Protect Taxpayers, Increase Competition in the Mortgage Market, and Improve the Stability of the Housing Market
WASHINGTON, D.C.-U.S. Sens. Mark Begich (D-AK) and Sherrod Brown (D-OH) today introduced legislation to protect taxpayers by ensuring sound lending practices by the Federal Housing Administration (FHA). The bill is companion legislation to the FHA Reform Act which overwhelmingly passed the U.S. House of Representatives in June 2010.
"For many Alaskans, mortgaging a home can be an intimidating process. I am proud to propose legislation providing qualified Alaska homeowners with an increased sense of security and easier access to safe mortgages. This legislation would improve conditions for all parties; those seeking mortgages, the Federal Housing Administration and taxpayers," said Begich.
"For years, FHA has provided qualified borrowers access to safe, affordable mortgages," Brown said. "This legislation will prevent taxpayer bailouts, improve FHA's risk management, and ensure more competition in the mortgage insurance market. Our goal is to promote a safe and sound market for qualified homeowners."
The FHA Reform Act would help the FHA improve its risk management and prevent future taxpayer bailouts by giving the FHA the ability to implement a risk-based pilot program and use outside credit risk experts. The bill would:
· Require the Secretary to indemnify lenders of direct endorsement programs or insured mortgages for mortgages not originated or underwritten in accordance with program requirements, or if fraud or misrepresentation was involved;
· Give the Secretary enhanced ability to review mortgagee performance and, if a mortgagee is found to have an excessive rate of early defaults or claims, to terminate the approval of the mortgagee to originate or underwrite single family mortgages in a specified area or areas, or on a nationwide basis;
· Require FHA to conduct a comprehensive review and actuarial report on defaults of FHA-insured mortgages that occur within two years of issuance; and
· Permit the Secretary to require higher down payments for all borrowers, or certain classes of borrowers, based on criteria related to borrowers' credit scores or other industry standards related to financial soundness. The Secretary may reverse such requirements when the insurance fund is replenished to its statutory target level.
This legislation is supported by the Mortgage Bankers Association, the National Association of Home Builders, and the National Association of Realtors.