FHA Update By Michele Francis Builder & Remodeler Oct 2007

This week there are reports that the Senate Banking Committee is now planning to mark-up its version of FHA modernization next Wednesday, September 19th.

The draft that will serve as the starting point for the Senate committee mark-up has not yet been introduced, but it apparently would raise the FHA limit to $417,000.00 in high-cost localities.  (We hear the house version of this bill might be brought to the floor later this month with even higher FHA limits.)  The Senate legislation would also let the FHA charge risk-based premiums for forward mortgages, a major change from the current practice.

With regard to HECM (Home Equity Conversion Mortgages), it remains to be seen what will be included in the Senate committee draft.  A key staffer for the Republican ranking member, Sen. Shelby (R-AL) has been pushing to include an annual authorization cap for FHA to insure up to 150,000 each year, in lieu of simply removing the cap entirely.  (The House bill would remove the cap altogether.)  There are Senators on “both sides of the isle,” who are prepared to offer or support amendments to delete this possible annual cap, if in fact the draft used for mark-up actually does include that provision.

We need to contact our Senators now to let them know of our concerns.  They need to know that we want them to support removing the overall cap on the number FHA HECM reverse mortgages that HUD can insure.  The HECM program helps many seniors stay in their homes, has a proven track record and is actuarially sound.  Seniors interested in obtaining reverse mortgages should not face a cap on their ability to do so.

In addition to next week’s planned legislative activity, Sen. Charles Schumer (D-NY), the chairman of the Joint Economic Committee, has scheduled a hearing, also on 9/19, on how problems in the subprime lending market are spilling over to the broader economy.  The next day, the House Financial Services Committee is to hold its second hearing on the credit crunch, with witness including the Federal Reserve Board Chairman Ben Bernanke, Treasury Secretary Henry Paulson, and Housing and Urban Development Secretary Alphonso Jackson.

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