House Financial Services Committee Passes Comprehensive FHA Reform

Washington, DC—The House Financial Services Committee passed H.R. 1852, the “Expanding American Homeownership Act of 2007” introduced by Representative Maxine Waters, Chairwoman of the Subcommittee on Housing and Community Opportunity, and Barney Frank, Chairman of the Financial Services Committee.  The bill would revitalize the Federal Housing Administration (FHA) to restore its historical role in ensuring critically needed mortgage loans for low and middle income families by authorizing zero down payment loans, directing the Department of Housing and Urban Development (HUD) to serve higher risk borrowers who would otherwise turn to predatory and high priced mortgage loan alternatives, and by raising loan limits so that FHA can serve high cost housing markets.  The bill now awaits a vote by the full House of Representatives.

“The passage of this bill is a major step towards making FHA relevant again in today’s unstable mortgage market where low and moderate income borrowers have been squeezed into unaffordable loan products with no safe options for refinancing, or for entering the housing market as first time, particularly in high cost areas of the country,” said Rep. Maxine Waters, Chairwoman of the Subcommittee on Housing and Community Opportunity.  “I applaud Chairman Frank for passing this bill out of committee and I call on the Senate to work quickly to modernize FHA and help strengthen the housing market and the economy, as soon as possible.

Specifically, the bill modernizes the FHA and brings it into the realities of the housing market in the 21st century by:

• Increasing loan limits in high cost areas of the country like California, New York, and Massachusetts, where FHA has been driven from the market, forcing many borrowers to turn to high-cost financing and other non-traditional loan products. 
• Authorizing zero down and lower down payment FHA loans for homebuyers who could not otherwise make the down payment required under current FHA rules, to make FHA more consistent with other private sector loan products.
• Directing FHA to underwrite to borrowers with higher credit risk than FHA currently serves that are still creditworthy to take out a mortgage loan, but are otherwise now being driven into the subprime loan market, with much higher mortgage rates.
• Permanently eliminating the current statutory volume cap on FHA reverse mortgage loans to permit this program to meet the growing needs of home equity rich, cash poor seniors citizens that need help paying bills or needed home costs, while capping the fees that loan originators can charge senior citizens
• Reinvesting increased FHA profits created by the bill in housing counseling and affordable housing fund activities

To view the rest of this news release from Congressman Barney Frank please visit www.house.gov/frank.