A House Financial Services panel on Tuesday approved a bill requiring the Federal Housing Administration (FHA) to submit a plan to Congress on how it will avoid a bailout of its financially strapped mortgage insurance fund.

The main section of the FHA reform bill requires the agency to charge a minimum annual mortgage insurance premium, and extends the agency's indemnification requirements to all approved lenders.

However, Rep. Scott Garrett, R-N.J., offered an amendment during the Housing subcommittee markup that instructs FHA to submit a report to Congress every two weeks on the financial condition of its single-family insurance fund. 

The amendment "tries to bring accountability and transparency to the FHA," Garrett said during a markup of the bill.

Congress needs to "know exactly what steps" FHA officials are taking to keep the mortgage insurance fund solvent and "exactly what the bailout process is if they don't," the New Jersey congressman said.

The subcommittee approved the Garrett amendment by a 7-4 vote. Democratic members claimed bi-weekly reporting is excessive and unnecessarily burdensome on FHA.

The bill, known as the "FHA Emergency Fiscal Solvency Act," was later approved by a voice vote.

The bill's sponsor, House subcommittee chairman Judy Biggert, R-Ill., noted that FHA is facing a financial crisis.  "FHA's cash reserves are down to dangerous levels and we can't affordable another Fannie- and Freddie-style bailout," Biggert said.

FHA currently charges a 115 basis point annual premium on mortgages with loan-to-value ratios higher than 95% -- but there is no statutory requirement to charge an annual premium.

Under the Biggert bill, FHA must charge a minimum annual premium of 55 bps. The bill caps the annual premium at 205 basis points.

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