The U.S. Senate Banking Committee has approved legislation that would set a floor on premiums charged by the Federal Housing Administration and require the government mortgage insurer to hold more money in reserve.
Members voted 21-1 today to advance the measure proposed by Banking Committee Chairman Tim Johnson, a South Dakota Democrat, and Senator Mike Crapo of Idaho, the panel’s top Republican. Senator Tom Coburn, an Oklahoma Republican, was the only member to vote against the bill.
Johnson’s Senate committee is tackling the question of the FHA’s solvency before weighing a broader overhaul of housing-finance that is likely to include replacing U.S.-owned Fannie Mae and Freddie Mac. The House is pursuing a bill backed by Representative Jeb Hensarling, the Texas Republican who leads the Financial Services Committee, that would liquidate Fannie Mae and Freddie Mac and limit government loan guarantees.
“This bipartisan bill will provide the FHA the tools it needs to get back on stable footing,” Johnson said of the Senate measure approved today.
The FHA is facing a shortfall of almost $1 billion in its insurance fund in the current fiscal year after defaults on loans backed during the housing bubble depleted its reserves.
The Senate bill would increase the cap on premiums the agency charges to borrowers and require annual evaluations of those rates. It would give the FHA more authority to go after lenders that break its rules and more power to require them to absorb losses on improperly underwritten loans.
The Senate bill is S.1376.