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Senate passes FHA reform bill.

Legislative reform of the Federal Housing Administration (FHA) took a giant step toward becoming law in December as the Senate overwhelmingly passed an FHA modernization bill.

On Dec. 14, the Senate, by a bipartisan 93-1 vote, approved the FHA Modernization Act of 2007 (S. 2338), which would, among other things, increase FHA single-family loan limits to the conforming loan limit, which is currently at $417,000, as well as lower FHA's down-payment requirement from 3 percent to 1.5 percent.

"American families are enduring record foreclosures and are being battered by predatory lending and a lack of credit," said Senate Banking Committee Chairman Christopher Dodd (D-Connecticut). "This measure can shield homeowners from harm by helping families find safe, fair and affordable mortgages. It can help provide credit, both for new homeowners and those seeking a way out of abusive loans in which they are currently trapped."

David G. Kittle, CMB, chairmanelect of the Mortgage Bankers Association, lauded the Senate's action and expressed hope FHA reform legislation can reach the president's desk and become law as soon as possible.

"Given the current housing market environment, modernizing FHA is something that the government can do that will have an immediate impact helping some distressed borrowers who are having trouble paying their current mortgages avoid foreclosure," said Kittle. "The fact of the matter is that FHA, due to statutory constraints, has not been able to keep pace with changes in the housing markets. This legislation will allow FHA to be more efficient and timely in meeting the needs of borrowers--which is especially important during this time of market turmoil."

S. 2338 would also prohibit seller-funded down-payment programs, lift the cap on Home Equity Conversion Mortgages (HECMs), institute a one-year moratorium on the implementation of risk-based premiums and prohibit for two years any increase of the multifamily mortgage insurance premium that would make it higher than the premium in place in October 2006.

The House, which passed its own FHA reform measure in September, and the Senate need to reach agreement on the differences in their respective bills before a final version can be sent to the president.
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Title Annotation:Briefing Book
Publication:Mortgage Banking
Geographic Code:1USA
Date:Feb 1, 2008
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