Congresswoman Waters on Future Role of FHA, RHS and GNMA

Congresswoman Maxine Waters (D-Calif.), a senior member of the Financial Services Committee and a leading champion for homeowners, delivered the following remarks today during a Subcommittee on Housing, Insurance, and Community Opportunity Hearing on "Legislative Proposals to Determine the Future Role of FHA, RHS and GNMA in the Single-and Multi-Family Mortgage Markets."

She also reintroduced H.R. 1977, her legislation to reform the Federal Housing Administration (FHA), which overwhelmingly passed the House in the 111th Congress by a vote of 406-4.

Congresswoman Waters' legislation will strengthen FHA's finances and save taxpayers money, while still providing affordable mortgage insurance to the individuals FHA is intended to serve. The bill also provides FHA with enhanced authority to crack down on lenders engaged in fraud or misrepresentation or failing to comply with FHA guidelines for originating or underwriting loans.

In addition, H.R. 1977 requires FHA to improve its internal controls to better manage risk and to provide transparent data to the public and to Congress. This includes improving monitoring of early defaults and claims, tracking mortgage information by loan servicer, providing FHA with the ability to contract out for additional credit risk analysis, requiring mortgagees to report to FHA when they stop buying loans from other mortgagees and requiring a Government Accountability Office study on FHA and Ginnie Mae. The bill also creates a new Deputy Assistant Secretary at FHA for Risk Management and Regulatory Affairs.

Congressman Barney Frank (D-MA), Ranking Member of the Financial Services Committee, and Congressman Luis Gutierrez (D-IL), Ranking Member of the Housing, Insurance, and Community Opportunity Subcommittee, are original cosponsors.

Today's Subcommittee Opening Statement:

"Madam Chairwoman, thank you for holding this hearing on the future of FHA, the Rural Housing Service and Ginnie Mae.

FHA's role has grown more significant in the years following the financial crisis of 2008, providing a crucial backstop in our mortgage market and ensuring continued access to safe and affordable products while the private market constricted.

Of course, with this increased role, it is appropriate to increase oversight and scrutiny of FHA. That's why FHA was one of my top priorities when I chaired the Housing and Community Opportunity Subcommittee during the last Congress.

In order to continue my work from the 111th Congress, yesterday I reintroduced the FHA Reform Act. Last year, I was able to work well with then-Ranking Member Capito on an FHA bill that overwhelming passed the House on a bipartisan basis. I hope that I can work with Chairwoman Biggert in a similar fashion in the 112th Congress.

I would like to note, however, a few concerns with Rep. Biggert's FHA discussion draft we are considering at this hearing today.

This discussion draft would increase downpayments – a move that was overwhelmingly rejected in Committee mark-up last year on a bipartisan basis. The rationale for this rejection was because FHA data demonstrated that increasing downpayments across-the-board would do little to improve FHA's reserves, while also restricting credit to qualified borrowers.

I think that allowing FHA to manage risk in a flexible manner is the best way to continue to protect their reserves.

Additionally, I strongly oppose the rapid reduction in FHA loan limits proposed in this bill, as I believe that decrease would have an absolutely chilling impact on our economic recovery. And unfortunately, because of the elimination of the nationwide loan limit floor, this impact would likely be felt the hardest in places where home prices are already low.

Finally, I think that there are major problems with moving rural housing programs to HUD, and I am very interested to hear the testimony from the rural advocates here today.

So, Madam Chairwoman, I think that there are some areas for agreement where I hope we can work together in the coming months, but I remain very concerned about several of the provisions in this bill.

Thank you, I yield back the balance of my time."

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