The House passed legislation Friday to give the Federal Housing Administration flexibility to raise mortgage insurance premiums on the loans it guarantees.
Sponsored by House Financial Services Chairman Barney Frank, the bill would give the FHA authority to increase the mortgage insurance premiums it charges, from 0.55 percent to 1.55 percent.
Frank, D-Mass., said the bill is part of a bipartisan effort to "make sure that the FHA is both an effective and efficient means for housing finance."
Historically, the FHA insured relatively inexpensive mortgages for low-income borrowers. But the FHA's share of the mortgage market rose significantly during the financial crisis as private lenders fled the housing market and the government stepped in to keep mortgage money flowing, loosening underwriting requirements and increasing the amount of new loans the agency could insure.
That surge in loan volume and defaults have thinned the FHA's capital reserves, which have now dropped below the 2 percent threshold mandated by Congress. Allowing FHA to increase its premiums would allow the agency to boost its dwindling capital reserves.
In June, the House passed a broader bill that included the provision, but the Senate has not acted on the bill. Frank said he intends to press the Senate to take up the broader bill.
Frank's bill also would require the assistant secretary of Housing and Urban Development to testify before Congress within 270 days of enactment of the bill to discuss the finances of the Federal Housing Administration. Frank said his panel would hold the hearing in September.
