21st Century FHA Housing Act of 2009

Madam Chair, I yield myself such time as I may consume.

I would like to thank the chairwoman, Chairwoman Waters, and the chairman of the full committee, Chairman Frank, and Ranking Member Bachus for their good, hard work on this legislation.

As I am an original cosponsor of this legislation, I rise in full support of H.R. 5072, the FHA Reform Act of 2010. H.R. 5072 amends the National Housing Act to include enforcement and premium changes to the FHA single-family mortgage insurance program that will improve the insurance fund's financial condition and enhance certain enforcement tools to protect against fraudulent or poorly underwritten and insured loans.

The bill incorporates a majority of the provisions in a bill that I introduced, H.R. 4811, the FHA Safety and Soundness and Taxpayer Protection Act. H.R. 4811, my bill, went further than the proposals put forth by the administration. My legislation included some additional enforcement, fiscal and risk-assessment tools necessary to adequately administer the program, detect fraud and abuse, strengthen underwriting standards, and protect the taxpayer. I appreciate Chairman Frank and Chairwoman Waters' willingness to include the additional provisions that were part of my bill which I believe made H.R. 5072 a stronger bill and one that is more able to address the pressing challenges before the FHA today.

I would also like to thank Secretary Donovan of HUD and Commissioner Stevens of the FHA for testifying before our committee, and also for working with me and my staff and the majority staff to formulate what I think is a very good bill.

The FHA was established by the National Housing Act of 1934 to broaden homeownership, protect lending institutions, and stimulate the building industry. I did not realize this, but prior to the creation of FHA, home mortgages did not exceed 50 percent of the home value and did not extend past the fifth year. At the end of 5 years, mortgages had to be either paid or renegotiated. But during the Great Depression, lenders were unable or unwilling to renegotiate many of the loans that came due. Consequently, many borrowers lost their homes and lenders lost money because property values declined significantly. The FHA program was established originally to provide stability and liquidity in the market. Its creation fostered the 30-year mortgage product and led to standardized mortgage instruments.

Once again, today, FHA has played an important role in a difficult housing market. As private sector lenders have scaled back their activities during the past 2 years, the FHA has significantly increased its share of the single-family mortgage market from less than 5 percent to more than 30 percent, but increased delinquencies and foreclosures across the Nation have had a detrimental effect on the financial health of the FHA program. An independent actuarial report which was published on November 12, 2009 showed that the capital reserve ratio for the Mutual Mortgage Insurance Fund, the MMIF, dropped below the congressionally mandated threshold of 2 percent to a less-than-expected .53 percent, a serious red flag. The actuarial review also indicated that the economic value of the FHA declined over 75 percent from last year to $2.73 billion. In light of these facts, it is essential that Congress and the FHA enact reforms to ensure that a bailout of FHA is not and will not be necessary.

Madam Chair, the provisions of this bill are an important step in providing HUD with the tools it needs to supervise and monitor the FHA program and adequately assess risk. As the chairwoman has said, of the many important provisions included, H.R. 5072 authorizes FHA to increase annual insurance premiums and requires indemnification by lenders for loss on loans they originate.

The program is intended to be self-funded. Proceeds from the premiums paid by the homeowners for the FHA guarantee are used to operate the program and pay losses when loans default. The ability to increase annual premiums will allow HUD the ability to raise annual premiums above the .55 percent cap, which will allow FHA to more adequately price for risk and to build up its reserve ratio which, as we know, has fallen below its congressionally mandated level. The indemnification provisions in H.R. 5072 will give HUD the ability to seek restitution against unscrupulous lenders who make loans they never should have made.

H.R. 5072 is an important and necessary bill; it gives HUD the tools it needs to raise the annual premiums so that HUD can begin the process of putting the FHA program back on the road to a program that has an adequate reserve ratio and enough capital for the program to run in a safe and sound manner.

However, let me be clear: H.R. 5072 is not a panacea. The Department and this Congress and future Congresses must be ever vigilant in our oversight of this program to make certain that the program is operated in a way that assures the taxpayer is protected.

Recent reports indicate that FHA, Fannie Mae and Freddie Mac are responsible for 100 percent of today's new mortgage originations, which means that the exposure for the taxpayer continues to grow day by day. That is why it was and still is imperative that reform of Fannie Mae and Freddie Mac be part of any attempt to fix our financial and regulatory system. Fannie and Freddie were a big part of what caused the financial collapse, and they must be part of the solution.

There are numerous issues currently being debated as part of the regulatory reform package such as risk retention, qualified mortgages, derivatives, hedge funds--and the list goes on--that could have significant implications for the future of the mortgage market as well as the direction of reform for Fannie and Freddie. H.R. 5072, the bill we are considering today, is extremely important because it provides the administration with the ability to increase the premiums which will improve FHA's current financial situation and prevent the need for any taxpayer bailouts.

I urge my colleagues to fully support H.R. 5072.

Madam Chair, I yield 3 minutes to a distinguished member of the Financial Services Committee and the Housing Subcommittee, my friend, Mr. Lee, from New York.

Madam Chair, I would just reiterate that this bill has my support. It passed out of the committee by voice vote. I think we did a good job meeting each other halfway on certain issues that we might have had some disagreement on, and I look forward to the passage of this bill.

Madam Chair, I yield back the balance of my time.

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 3146) to make improvements to the FHA mortgage insurance programs of the Department of Housing and Urban Development, and for other purposes, as amended.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks on this legislation and to insert extraneous material thereon.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I want to start by thanking the Republican lead on this bill, the gentleman from New York (Mr. Lee) for his hard work on this important issue. This is the sort of example of bipartisanship that I think the American people expect from us, and I am happy that in this case Mr. Lee and I could work together to try to bring some good relief to the American people.

I introduced H.R. 3146, the 21 Century FHA Housing Act earlier this year with bipartisan support to provide the Federal Housing Administration with the necessary tools to serve taxpayers during these challenging economic times.

FHA is currently one of the primary sources for safe, affordable mortgage financing for American families. During recent years, as private lenders have fled the market, the demand for FHA markets have grown exponentially. Its market share has ballooned from less than 3 percent of the market in 2006 to 23 percent of all mortgages today. We need to ensure that the FHA is able to meet this need efficiently and honestly.

Like most Americans, I am tired of hearing about more waste, fraud, and abuse in Washington or around the country. That is why the 21 Century FHA Housing Act is so very important. The bill will take steps to fix these problems and protect American taxpayers. It gives the FHA the authority to attract personnel with the skills and experience necessary to manage the increase in business. In addition, the FHA must be given sufficient resources to maintain the ability to enforce high underwriting and oversight standards and operate safely and effectively.

Enforcing high underwriting standards will yield safer products and protect the American taxpayer. We need to ensure that government programs are efficient and working on behalf of hardworking middle class families. With this increase in market share, comes an increase in risk. That is why this bill directs the Housing and Urban Development secretary to conduct an ongoing review of at-risk mortgages and provide a report to Congress on ways to improve at-risk management. This report will also make it easier to identify rogue predatory lenders and eliminate waste, fraud, and abuse in the FHA system.

Mr. Speaker, the FHA is helping to provide credit to eligible homeowners within a marketplace where many credit lines are frozen. But it is imperative that these loans are good for families, our economy, and taxpayers. Failure to pass this bill may open the door for more of the mortgage fraud and abuse that helped cause the recent economic recession from which America is still suffering.

I reserve the balance of my time.

Does the gentleman yield back?

Mr. Speaker, I want to echo the comments of my friend, Mr. Lee from New York. We really did work in a bipartisan way to address a problem to save taxpayers from the waste, fraud, and abuse that I think frustrates so many Americans.

Many of America's economic problems are due to problems experienced within the housing market. The 21 Century FHA Housing Act of 2009 will make significant enhancements to FHA and will enable the administration to better manage the portfolio of loans and eliminate some of that waste, fraud, and abuse that frustrates us so very, very much.

As FHA steps into the void created by the predatory lenders, these improvements will be increasingly important. I urge all of my colleagues to support this important bill.

September 14, 2009.

Hon. John Adler,

House of Representatives,

Washington, DC.

Dear Congressman Adler: The undersigned organizations,

representing the real estate industry, urge your support of

H.R. 3146, the ``21st Century FHA Housing Act of 2009.'' This

bill will modernize the Federal Housing Administration (FHA),

allowing it to continue to offer safe, affordable mortgages

to American families, at no cost to taxpayers.

Despite FHA's growing role in the market, FHA's technology

and infrastructure are far behind the times. To better serve

American consumers and protect taxpayer interest, immediate

changes need to be made. Computer systems must be upgraded,

and sufficient staff be hired to handle all the

responsibilities of an agency that is meeting the needs of so

many American homebuyers.

Additionally, we support efforts to strengthen warehouse

lending in ways that would allow the marketplace to continue

to meet the demand for single-family and multifamily mortgage

products. Consumers benefit the most when there is

competition in the market and full access to credit.

H.R 3146 will allow FHA to continue its modernization,

utilize all of its mortgage programs, and assure that

homeowners have affordable safe options for homeownership. We

urge you to quickly pass this important legislation to update

FHA's programs to address the pressing needs of the current

mortgage market.

Sincerely,

Mortgage Bankers Association, National Association of

Homebuilders, National Association of REALTORS'.

I yield back the balance of my time.

Madam Chair, I yield myself such time as I may consume.

Madam Chairwoman, I stand in strong support of H.R. 5072, the FHA Reform Act of 2010.

This bill is the product of three hearings on FHA in the past 6 months and bipartisan work with the ranking member of the Subcommittee on Housing and Community Opportunity, Congresswoman Capito. In fact, this bill contains most of the provisions Congresswoman Capito included in her bill on FHA introduced earlier this year.

Moreover, I am proud to say that this bill passed out of the Financial Services Committee on a simple voice vote back in April.

The FHA Reform Act is critical, timely, and important for households across the country. The act will enable the FHA to respond to the current housing and economic crisis and continue its mission of providing homeownership opportunities to millions of Americans.

We know that now, more than ever, preserving this mission is critical. As the private market has contracted, FHA has stepped into the void and injected much-needed credit into our mortgage system. Increasingly, it is the only option available for American homebuyers with less than a 20 percent down payment.

FHA insurance has been particularly important for minority communities, low-income families, and first-time homebuyers. The bill would provide FHA with more flexibility to adjust their annual mortgage insurance premium.

As I understand it, if FHA limits the premium increase to 0.90 percent, as Commissioner Stevens has indicated, new borrowers will see their monthly payments rise by about $42 a month.

Now, while I am reluctant to support providing FHA with more flexibility, I believe that this provision is needed to keep FHA financially healthy. We have also taken steps to ensure that FHA requirements are not excessively onerous for homebuyers.

Secondly, this bill provides FHA with the authority to crack down on lenders that use fraud or misrepresentation or don't originate or underwrite loans in accordance with FHA guidelines. FHA has already taken steps to increase its lender enforcement activities, and the provisions included in this bill will empower them to rout out the bad actors while reserving the program for the lenders that follow the rules.

Thirdly, this bill empowers FHA to improve their internal controls that improve data tracking, risk management, and reporting to the public and to Congress. This includes improving monitoring of early defaults and claims, tracking mortgage information by loan servicers, providing FHA with the ability to contract out for additional credit risk analyses, requiring mortgagees to report to FHA when they stop buying loans from other mortgagees, and requiring a GAO study on FHA.

The bill also creates a new Deputy Assistant Secretary at FHA for risk management and regulatory affairs.

I believe the bill in front of us today is critical for ensuring a strong future for FHA, and I request my colleagues' support.

I reserve the balance of my time.

Madam Chair, I would simply like to close by thanking Mrs. Capito for all of the work that she put

into this legislation and the cooperation that she gave to me and her staff to my staff.

This is a good bill. The differences have been worked out between both sides of the aisle. We worked hard to make sure that we maintained FHA, but that we keep a close watch on it; that, in fact, we give it flexibility, but at the same time ensure the continuity and the consistency of FHA that should be there to provide the guarantees for our citizens that so desperately need them.

Madam Chair, I yield back the balance of my time.

I move that the Committee do now rise.

Accordingly, the Committee rose; and the Speaker pro tempore (Mr. Schiff) having assumed the chair, Mrs. Halvorson, Chair of the Committee of the Whole House on the State of the Union, reported that that Committee, having had under consideration the bill (H.R. 5072) to improve the financial safety and soundness of the FHA mortgage insurance program, had come to no resolution thereon.

Mr. Speaker, I yield myself such time as I may consume.

I rise today in support of H.R. 3146, the 21 Century FHA Housing Act of 2009. I want to thank my colleague from New Jersey (Mr. Adler) for helping to drive this legislation. It will get the job done, and it is about time we start doing what the American people want. I think this is a wonderful piece of bipartisan legislation that will take important steps towards restoring the stability of our housing market and helping our overall economic recovery.

While western New Yorkers never had a housing boom to bust, I still often hear from my constituents who have been responsible homeowners and who are increasingly frustrated by the level of fraud and abuse in our mortgage system. Western New Yorkers understand you cannot take risks without accepting the consequences. We have all seen the aftereffects of irresponsible lenders, and Congress has rightfully looked at outdated mortgage structures to ensure responsible homeowners have access to safe and affordable mortgages without burdening them with the mistakes of others. That's why we have crafted legislation to address this pressing need in the current mortgage market.

In order to ensure a stable housing market and help first-time home buyers, we need to modernize the Federal Housing Administration, which is now one of the primary sources of mortgage financing. It is imperative that the FHA has the resources it needs to effectively oversee mortgages and ensure that no bad actors are allowed to function in this marketplace.

During recent years, as private lenders have fled the market, the demand for FHA mortgages grew exponentially. FHA mortgages tripled in 2008, and in 2009 the amounts are expected to exceed $290 billion.

In order to effectively meet the new influx of work, several legislative changes are needed to modernize the system. H.R. 3146 will address concerns about proper review and oversight of FHA lenders and loans by improving target reviews of loan performances.

In addition, this legislation ensures that FHA has the staff, the technology, and risk management processes in place to protect American taxpayers from unacceptable losses.

Finally, the measure provides the HUD Secretary with the authority to implement new and innovative ideas to minimize foreclosures going forward.

We cannot keep this dream of homeownership alive and within reach of working families unless we have an FHA that works better.

Again, I want to express my appreciation to my friend and colleague from New Jersey for his cooperation in crafting this measure. It is important for the American people to see that both parties are working together on this vital issue. I urge immediate passage of H.R. 3146.

I reserve the balance of my time.

I have no more speakers, but I yield myself the balance of my time to close.

When I looked at this piece of legislation going back several months ago, it was very important that we found a solution for this. I talked to constituents in my district, and they are so hard-pressed dealing with other forms of lending and getting FHA stable, it was incredibly important, as was the idea of making sure that we use taxpayer dollars wisely.

We were fortunate enough from the hearings to understand some of the challenges that FHA has had in terms of technology, and the fact that we really haven't funded this program to its fullest extent by not having enough staff in support of FHA, thereby the potential for fraud or waste or abuse has risen, and that's why, again, taking a piece of legislation like this and moving it forward is incredibly important.

As I look forward to trying to move this along, I know people in our district will be pleased, not only in my district but throughout the country, that we are pushing this type of bipartisan legislation.

Mr. Adler has taken a very firsthand approach in trying to ensure that this happens.

At this time, I yield back the balance of my time.

I thank my friend from West Virginia for yielding.

I rise today in support of H.R. 5072, the FHA Reform Act of 2010. This legislation before us today clearly takes important steps towards restoring stability into our housing market.

I share the frustration that I hear, though, from my constituents in western New York who have been responsible homeowners but who are increasingly paying the price for the fraud and abuse throughout our mortgage system. No one--no business and no person--should be able to take risks without having to accept the consequences.

We've all seen the consequences of the actions taken by irresponsible lending practices, and Congress has rightfully looked at outdated mortgage structures to ensure responsible homeowners have access to safe and affordable mortgages without forcing them to pay for the irresponsibility of others.

Earlier this year, I joined my friend from New Jersey (Mr. Adler) in introducing H.R. 3146, the 21st Century FHA Housing Act, which took much of what we have learned from past FHA shortages to ensure they don't happen again. I am pleased that the bill before us today does this as well and includes many of the reforms that we proposed last year. H.R. 5072 will help ensure that FHA will be a stabilizing force in the market and support responsible homeownership for first-time buyers and underserved markets.

Given that FHA is now one of the primary facilitators of mortgage financing, it is absolutely necessary that we get this reform right. FHA must have the resources it needs to effectively oversee mortgages and ensure that no bad actors are allowed to function in the marketplace.

We need a responsive, efficient, and capable FHA to help ensure that owning a home remains part of the American Dream. I believe the bill before us today will help keep that dream alive. I urge my colleagues to support its passage.