Industry trade groups are urging Senate leaders to pass a stand-alone Federal Housing Administration reform bill (H.R. 5072) before they adjourn on August 7 for a month-long recess.
Ten trade groups, along with the U.S. Conference of Mayors, claim passage of the measure is needed to replenish the capital reserves of the FHA mortgage insurance fund that have "fallen dramatically" due to loan defaults and foreclosures.
"Without the financial reforms in H.R. 5072, the chances will be much greater that this shortfall will land on the backs of taxpayers. The Congressional Budget Office estimates passage of this legislation will decrease federal spending by $2.5 billion over the next 5 years," the July 28 joint letter says.
The House has already passed H.R. 5072, which allows the HUD secretary to increase the FHA annual premium up to 1.5% from 0.55%. HUD officials believe passage would allow FHA to restructure its upfront and annual premiums in a way that benefits borrowers as well as the fund.
Last week, the Senate Appropriations Committee approved a Transportation-HUD budget bill for fiscal year 2011 that includes authorization for FHA to increase the upfront premium to 1.5%.
The House Transportation-HUD appropriations bill also includes the FHA premium increase. It is unclear when, and how, Congress will pass the appropriations bills. But it definitely won't happen until Congress returns in September.