The House of Representatives on June 10 passed H.R. 5072, the FHA Reform Act, by a vote of 406 to four. H.R. 5072 would help recapitalize the Federal Housing Administration (FHA) and allow the program to operate responsibly without congressional funding.

NAHB supported the overall legislation, while strongly opposing three amendments that would have caused great harm to the FHA and the market it serves, and the association supported one key amendment on multifamily loan limits.

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. H.R. 5072 would enable the agency to better manage its risk and improve its financial position by adjusting its premium structure for new borrowers and shifting some of the upfront cost to the annual premium. 

Specifically, the legislation would allow 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 that 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. 

Throughout the debate in the House, NAHB has been supportive of these efforts to strengthen FHA's finances.

As the bill was debated on the House floor, three amendments were proposed that would have harmed consumers and threatened the economic recovery:

• An amendment by Rep. Scott Garrett (R-N.J.) would have raised the downpayment for borrowers from 3.5% to 5% and prohibited financing on up-front premiums.
  
  
• A proposal by Rep. Tom Price (R-Ga.) would have limited the FHA’s market share to 10% of all privately originated home loans each year.
  
  
• An amendment by Rep. Michael Turner (R-Ohio) proposed to reduce the maximum FHA loan limit from $729,750 to $500,000.

NAHB sent a letter to House members, along with several like-minded industry groups, expressing its strong opposition to all three amendments, which were soundly defeated by wide margins.

Additionally, NAHB supported an amendment offered by Reps. Anthony Weiner (D-N.Y.) and Gary Miller (R-Calif.) to allow the FHA to facilitate the construction and rehabilitation of apartments — particularly in urban areas where financing is not readily available in the current economic climate — by increasing the FHA loan limits for high-rise properties in high-cost areas. The Weiner-Miller amendment is identical to language in H.R. 3527, which passed the House unanimously on Sept. 15, 2009 with NAHB’s full support. 

As H.R. 5072 heads to the Senate, NAHB will continue to support the overall bill while guarding against damaging amendments.

To view the legislation, click here and type the bill number in the box at the upper center of the page.

For more information, e-mail Scott Meyer at NAHB, or call him at 800-368-5242 x8144.