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Reform efforts could result in a much smaller scope of permissible lending at the FHA, with a renewed focus on its traditional core of low-income customers, higher credit score requirements and increased down payments.
March 12 -
The agency's annual independent actuarial report is expected to show that its capital reserves have been depleted by rising levels of defaults. FHA could shore up its finances by increasing its enforcement against banks and other lenders, but it may also need to tap the Treasury for the first time in its history.
November 13
WASHINGTON — Rep. Randy Neugebauer, chairman of the House Financial Services subcommittee on housing and insurance, said Wednesday that he hopes the panel can begin voting as soon as late spring or the summer on legislation to overhaul the Federal Housing Administration.
The Texas Republican said the panel will continue to hold hearings examining the various concerns about the FHA's mission and management in the wake of the financial crisis, specifically saying he plans to take a closer look at the agency's reverse mortgage business soon.
"I want to talk about reverse mortgages in just a little bit, and then just take a look at what are some of the FHA programs that are out there," said Neugebauer in an interview after a subcommittee hearing. "Then by the middle part of the summer or late spring, we could begin to talk about possibly bringing some bills to the subcommittee to start marking up and see where we go from there."
One major hurdle for any bill, on display again at Wednesday's hearing, is the stark partisan divide on the banking committee, including how to address the agency's projected $16.3 billion capital shortfall.
If the agency doesn't raise its cash reserves, it could be required to tap the Treasury Department for funding later this year. GOP lawmakers continued to hammer the FHA for its financial situation, including its accounting methods, while Democrats argued that the projected shortfall doesn't mean the housing agency is out of money — just that its reserves are below the legal level.
"None of us think they're going to have to dip into the taxpayer funds this year. I can't imagine anyone would defend a stupid law. Therefore, we should change a stupid law," said Rep. Michael Capuano, the subcommittee's ranking member, at the hearing.
The Massachusetts Democrat earlier this month introduced legislation, the End Unnecessary Borrowing Act of 2013, which would require any funds transferred from the Treasury Department be used to pay mortgage insurance claims, not just meet the capital reserve requirement.
Lawmakers also continued to disagree over what FHA's proper role is in the market following the financial crisis. The private market pulled back significantly on lending and tightened credit during the recession, leading FHA to greatly expand its market share. How far the agency should now reduce its role, and whether it's crowding out private mortgage insurers, remains disputed.
Despite the contentious hearing, Neugebauer remained cautiously optimistic about the possibility for FHA reform down the road.
"We're going to encourage some of our members to seek cosponsors in a bipartisan way for some ideas that we want to put out there," he said in the interview. "If we can get a good vote in the House, a bipartisan vote in the House, maybe we can knock on the door and wake the senators up and ask them if they would consider helping us pass some of that legislation."
