“H.R. 5121, Expanding American Homeownership Act of 2006:
“Introduced by Rep. Ney on March 6, the bill would modernize the 72-year-old Federal Housing Administration (FHA) in order to decrease premiums for borrowers and increase access to homeownership.
“H.R. 5121 would base mortgage insurance premiums on the borrower’s credit history, loan-to-value ratio, debt-to-income ratio, and on FHA’s historical experience with similar borrowers. The legislation amends the National Housing Act to change the factors for determining the maximum single-family mortgage amounts insurable by FHA. In addition, FHA would be allowed to insure up to the full median house price in the area, as opposed to 95 percent of the median house price.
“Additionally, the bill would amend the National Housing Act to provide more flexibility to cash downpayment requirements by eliminating the three percent requirement allowing the HUD Secretary to determine the appropriate cash requirement based upon the likelihood of default.
“Rep. Ney said, “H.R. 5121 seeks to bring FHA back into business and to restore the FHA product to its traditional market position. American families need safe options when purchasing a home, at a fair price. Families need a way to take part in the American Dream without putting themselves at risk. Families need FHA and through this comprehensive legislation FHA will be made more efficient and streamlined which will improve competition in the prime home loan mortgage industry.”
“The FHA was created by the National Housing Act of 1934 to provide stability and liquidity in the market in order to broaden homeownership, to protect lending institutions, and to stimulate the building industry. Prior to its creation, mortgages did not exceed 50 percent of the home value and did not extend past the fifth year. At the end of the five years, mortgages had to be paid or renegotiated.
“The FHA provides only mortgage insurance for those loans that meet FHA-established underwriting standards. Since 1934, FHA has insured more than 33 million loans and is the largest insurer of mortgages in the world.
“FHA is one of the few government agencies to operate entirely based on the fee-income derived from its programs, which means the taxpayer does not pay or subsidize the agency.
“The Subcommittee on Housing and Community Opportunity held a hearing April 5 on the Administration’s proposed reforms for FHA’s single-family mortgage insurance activities.
“A manager’s amendment offered by Rep. Ney that was agreed to by a voice vote would: increase loan limits for two, three, and four-family residences; mandate a study to examine the mortgage insurance premiums charged for home equity conversion mortgages or reverse mortgages; invite state licensed mortgage brokers to participate in FHA as determined by the HUD Secretary; and encourage HUD to use a portion of the funds FHA receives from premiums in excess of what it pays out in claims to upgrade FHA’s current technology and report on the progress to Congress.”
