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Monday, July 22, 2013

Housing Reform Dominates this week in Congress

The House Financial Services Committee will vote tomorrow at 10:15 a.m. on Chairman Jeb Hensarling’s housing reform proposal, known as the PATH Act.

The full Senate Banking Committee (SBC) will meet Wednesday at 10 a.m. to discuss the Federal Housing Administration reform bill introduced by Sens. Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho) last week.  According to the SBC, the Johnson-Crapo FHA Solvency Act will:
 
Strengthen Underwriting and Promote Long-term Solvency
  • Create an advance warning system by raising the minimum for the Mutual Mortgage Insurance Fund’s capital reserve ratio to 3 percent.  If the capital ratio doesn’t meet certain targets as it builds to the new minimum ratio, the bill would require HUD to take immediate action to address the shortfall while keeping Congress fully informed.  This increased accountability and transparency will help ensure taxpayers are not unexpectedly left on the hook for bailouts.
  • Require minimum annual mortgage insurance premiums to improve the long-term solvency of the FHA program.  The premium levels will be reevaluated annually to ensure that the premiums cover loans’ expected risk and maintain the capital reserve ratio.
  • Require HUD to evaluate and revise, as necessary, underwriting standards using criteria similar to the CFPB’s Qualified Mortgage rule.  This will help better ensure borrowers get loans they can afford, and avoid foreclosure.
 Improve Lender Accountability
  • Require HUD to consolidate guidelines for lenders and servicers regarding the requirements, policies, processes, and procedures that apply to loans insured by FHA. This will eliminate confusion, clarify lending and servicing standards, and ease regulatory burdens.
  • Provide HUD with broad new tools to hold lenders accountable for issuing inappropriate or fraudulent mortgages.  Currently, HUD is limited in the damages it can seek from bad actors in the mortgage market.  These new authorities will better protect taxpayers and hold lenders accountable when they break the rules.