Senate Democratic leaders want to pass an Federal Deposit Insurance Corp. (FDIC)/housing bill on Tuesday but first they have to wade through a number of amendments including one that would require a temporary shutdown of the Federal Housing Administration (FHA) single-family program if it is headed toward insolvency.
The sponsor of the FHA amendment, Sen. David Vitter, R-La., says there are signs that FHA is a "ticking time bomb" and the government should be "very cautious" about expanding the FHA program.
"My amendment would simply say that the first duty of the FHA is to maintain solvency," Vitter said. Industry groups, such as the mortgage cooperative Lenders One, are urging the Senate to reject the Vitter amendment. Shutting down the FHA program would be "devastating to the economy," and "shock" the housing and mortgage markets, Lenders One warns in a letter to the Senate.
The FDIC/housing bill (S. 896) includes improvements to the FHA Hope for Homeowners program, legal protections for servicers and increases the FDIC's borrowing authority. The House has passed a similar bill (H.R. 1106). The House version contains a bankruptcy cramdown provision that the Senate has rejected.
