The Official Online Newspaper of NAHB
The Senate on Aug. 4 approved H.R. 5981, legislation that will help recapitalize the Federal Housing Administration (FHA) and allow the program to operate responsibly without congressional funding.
The House passed the measure on July 30.
While the FHA now services nearly 30% of new mortgages, the agency’s loan losses have depleted its capital reserves, leaving the Mutual Mortgage Insurance Fund below its statutory minimum reserve ratio. H.R. 5981 will enable the agency to better manage its risk and improve its financial position by adjusting the premium structure on FHA single-family mortgages for new borrowers and shifting some of the upfront cost to the annual premium.
Specifically, the legislation allows the FHA to increase the annual mortgage insurance premium (MIP) from 0.55% to 1.55% for borrowers who make less than a 5% downpayment.
While the FHA is only expected to increase the annual premium to between 0.85% and 0.95%, this additional flexibility will allow the agency to reduce the up-front MIP, which was recently increased to 2.25%. Shifting some of the increase from the up-front to annual premium will reduce the impact on the consumer.
NAHB supported this measure, which will bolster the agency’s capital reserves, and continues to work with lawmakers to enact further reforms that will ensure sound lending practices by the FHA.
To view the legislation, click here and type H.R. 5981 in the box at the upper center of the page.
To view comments from FHA Commissioner David Stevens on passage of H.R. 5981 and the need to achieve broader FHA reforms, click here.
For more information, e-mail Scott Meyer at NAHB, or call him at 800-368-5242 x8144.