Hearing on “The FHA Act of 2010”
Congresswoman Maxine Waters, Chairwoman of the Subcommittee on Housing and Community Opportunity, delivered the following opening remarks during a hearing by the Subcommittee on "The FHA Act of 2010":
"Good afternoon, ladies and gentlemen.
I would like to thank the Ranking Member and the other Members of the Subcommittee on Housing and Community Opportunity for joining me today for this hearing on "The FHA Reform Act of 2010."
This is our third hearing on the Federal Housing Administration (FHA) since October of last year. During those hearings, we learned about the state of FHA's capital reserve levels, which dropped below the 2 percent threshold mandated by Congress to 0.53 percent, along with the efforts FHA is taking to tighten controls over risk.
Today, we are here to discuss the additional steps FHA would like Congress to take to ensure FHA's long-term financial solvency during what some observers are referring to as the housing and economic equivalent of a "500-year flood."
First, FHA would like to increase the cap on the annual mortgage insurance premiums it can charge in order to boost capital reserves. The bill would allow FHA to increase the cap from 0.55 percent to 1.55 percent for new borrowers with downpayments below 5 percent. However, FHA has said that they will only raise annual premiums to 0.90 percent, and would also use their existing authority to lower the upfront premium back down. As I understand it, if FHA limits the premium increase to 0.90 percent, new borrowers would only see their monthly payment rise by $42 a month.
I believe that limiting the premium increase balances the need to keep FHA financially solvent while minimizing the impact on new borrowers. However, I would like to hear more information from the Commissioner about the circumstances under which FHA would need to raise annual premiums to 1.55 percent of the loan balance.
Second, FHA is also seeking the authority to crack down on lenders that use fraud or misrepresentation or don't originate or underwrite loans in accordance to FHA requirements. In addition, FHA would like the ability to withdraw originating and underwriting approval for a lender nationwide based on the performance of one or more of its regional branches.
These legislative provisions will help FHA continue its increased policing of problem lenders. FHA has already stepped up enforcement – withdrawing 10 times as many lenders from FHA approval in 2009 than the last Administration did in 2008.
I have been long committed to ensuring that FHA remains an available, affordable and safe option for all families. I wrote legislation to modernize FHA, which was included in the Housing and Economic Recovery Act of 2008. I also worked with Rep. Speier of California and Rep. Driehaus of Ohio on legislation to keep subprime lenders out of FHA, which was incorporated into the Helping Families Save Their Homes Act of 2009.
I look forward to continuing to work on sensible legislation that will balance the requirement to restore FHA's financial solvency with the requirement that we need to keep FHA available to a wide variety of Americans, including low-income, minority and first-time homebuyers. However, as we move forward, we need to be cautious that we do not overcorrect, and end up curtailing the role of FHA to the point where homeownership is only available to the wealthiest households.
I am eager to hear the testimony of our witnesses today and I would now like to recognize our Subcommittee's Ranking Member to make an opening statement."
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