The House passed a bill yesterday to try to help balance the books of the Federal Housing Administration (FHA), an agency that some fear could be headed down a fiscal rabbit hole without reforms. FHA’s finances have taken a hit with the foreclosure crisis, while continuing to shore up a tremendous share of America’s home mortgages.
The bill has generally been received well by fiscal conservatives and affordable housing advocates alike, as a cost-saver and a way to protect homeowners by penalizing fraudulent lenders.
Though two aspects of the bill in particular have incited some passionate responses:
• First, the bill increases the maximum annual premiums that FHA charges borrowers from .55% to 1.5%, a move the agency says will “will generate about $300 million a month, while costing the average FHA borrower $42 extra in monthly premiums, ” according to the Wall Street Journal. The National Association of Realtors, an NHC Housing Leadership Support Program Sponsor, is in favor of the hike, arguing it would let FHA “lower the up-front premium that places a burden on cash-strapped borrowers at closing.”
• The bill also includes a requirement for the Department of Housing and Urban Development to prevent homeowners from “strategically defaulting,” or returning a property that has lost most of its value to the bank even though the holder of the mortgage has the money available to pay it off. Dean Baker, head of the Center for Budget and Policy Priorities, is livid on this:
“Rather than respecting the sanctity of contract [between homeowner and bank], the Republicans want to punish homeowners who look out for their own best interest… Strategic default is a standard business practice… Do we think that bankers are too stupid to understand contracts?”
The bill passed with an NHC-supported provision to make rental housing more affordable, by increasing the FHA limits on loans for apartment construction and renovation, particularly in urban areas where financing is hard to find in this environment.
It’s now up to the Senate to put together a companion bill.