FHA Modernization Bill Passed: Mortgage Industry

• MBA (9/19/2007 ) Sorohan, Mike
  The House yesterday passed a bill that would modernize the Federal Housing Administration by a 348-72 vote. The Mortgage Bankers Association, while noting flaws in the bill as passed, nonetheless praisedthe House and said the bill would satisfy one of MBA's top priorities.

H.R. 1852, the Expanding American Homeownership Act of 2007, would:

• · Authorize zero- and lower downpayment loans for borrowers that can afford mortgage payments, but lack the cash for a required down payment;
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• · Authorizes more than double the current funding level for housing counselingto help subprime homebuyers and borrowers late on mortgage loan payments;
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• · Directs FHA to provide mortgage loans to higher-risk (but qualified) borrowers, without authorizing unnecessary fee hikes on such borrowers;
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• · Enhances the FHA reverse mortgage loan program to help seniors pay for health and other expenses, by removing the loan cap to avoid program shutdowns, raising loan limits and by reducing the maximum fee lenders can charge for these loans;
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• · Raises FHA multifamily loan limits, so these loans can fully fund construction costs in high-cost areas, and enhances sale of foreclosed FHA rental housing loans to localities;
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• · Authorizes up to $300 million a year from the bill's excess profits for affordable housing, instead of returning such funds to the General Treasury; and
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  • Raises FHA single-family loan limits, which currently bar loans above 95 percent of the median home price in each local area and shut FHA out of higher cost home markets. The bill raises the FHA loan limit in each area to the lower of (a) 125 percent of the local area median home price or (b) 175 percent of the national GSE conforming loan limit. The amendment also retains the bill's provision for a nationwide FHA loan floor of 65 percent of the GSE conforming loan limit and gives HUD authority to raise these loan limit amounts by up to $100,000 "if market conditions warrant."