A sub-committee of the House Financial Services committee today approved the FHA Emergency Solvency Act which is intended to shore up the finances of the Federal Housing Administration (FHA). The legislation strengthens FHA's Mortgage Insurance Fund by establishing minimum annual premiums for mortgage insurance; barring unscrupulous lenders from participating in the program, improving the FHA's internal financial controls, transparency, and disclosure requirements, and requires lenders who commit fraud to repay any losses suffered by FHA as a consequence.
FHA's cash reserves have been hard-hit by the housing crash and have fallen below 2 percent Congress has mandated it must maintain. According to the subcommittee's press release, the agency's finances have deteriorated to the point where a bailout might be required in 2012 if the housing market worsens further.
"The FHA's cash reserves are down to dangerous
levels, and taxpayers cannot afford another Fannie- and Freddie-style bailout,"
said Rep. Biggert. "This Administration needs to enforce stronger
standards and create room for the private sector to replace taxpayers as the
primary source of funding. 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."
Also on Tuesday the Subcommittee approved the Affordable Housing and Self-Sufficiency Improvement Act, which is intended to expand opportunities for low-income families that receive housing assistance to achieve self-sufficiency and reduces the costs of HUD's affordable housing programs and the Homeless Children and Youth Act, which harmonizes HUD's definition of homeless children with that of other agencies like the Department of Education, allowing HUD to more accurately estimate the number of homeless in the U.S.
All three measures were passed by voice vote.