FHA Reform – An Irresponsible Congress Again Fails to Act

 Residential Mortgage  Comments Off on FHA Reform – An Irresponsible Congress Again Fails to Act
Oct 312007

With alacrity unbecoming on this Congress, the House of Representatives passed the Expanding American Homeownership Act of 2007 in September. After passage of the bill, Rep. Maxine Waters, Chairwoman of the Subcommittee on Housing and Community Opportunity stressed its critical nature. “There is an affordable housing crisis in America. In recent months, that crisis has exploded beyond the poorest renters and homeowners to threaten the domestic economy.” said Chairwoman Waters.

The Senate Banking Committee promptly passed its own version of FHA reform the very next day by a 20-to-1 bipartisan vote. Chairman Christopher Dodd promised to “fight for swift passage so that homeowners can get the relief they deserve.”

But here we are more than a month later, and all that urgency seems to have dissipated. According to the Washington Post’s Kenneth Harney in a 10/27 column, “the Senate FHA bill doesn’t even have a number and has not been sent to the majority leader’s office for scheduling a floor vote. A spokesman for Dodd, Marvin Fast, said committee staff work on the bill is underway, but he had no explanation about what happened to earlier promises of quick action to aid homeowners in distress.”

Congress must have breathed a sign of relief when foreclosure filings dropped 8% last month. I hope they caught their breath again when it read that the September reading is still double the number reported a year ago and is the second highest monthly total on record.

The problem is still very real. HUD Secretary Alphonso Jackson estimates that 500,000 subprime mortgage borrowers could wind up in foreclosure when their interest rates adjust upward over the next 18 months. A consumer advocacy group pegs the number two to four times higher.

The FHA reform legislation would provide relief by raising loan limits in high-cost areas of the country, reducing required down payments, and opening up FHA lending to more competition. Many consider it a crucial relief measure for homeowners who need to refinance out of adjustable-rate loans to avoid foreclosure.

One cannot help but wonder if the Democratic Congress is more interested in manufacturing a campaign issue than in helping strapped homeowners.

The Democratic leadership held a news conference on 10/3 to bash the President for his handling of the mortgage crisis. Senate Majority Leader Harry Reid said, “This is a national crisis. Too bad it’s taken so long to realize that we have a crisis.” He joined Dodd and House Speaker Nancy Pelosi in calling for President Bush to make an emergency appointment of a “mortgage czar” to respond to rising delinquencies and foreclosures.

Where have these guys been? For two years, President Bush has sought legislation revamping the Federal Housing Administration but Congress has done nothing, according to Housing and Urban Development Secretary Alphonso Jackson. “To place even one family at risk is irresponsible, and Congress should stop playing politics with homeowners’ financial security,” Jackson said.

 Posted by on October 31, 2007 at 6:58 pm