Senate Passes FHA Overhaul
Aimed at Stemming Mortgage Woes
By MICHAEL R. CRITTENDEN
December 14, 2007 1:14 p.m.
WASHINGTON -- The Senate passed legislation overhauling the Federal Housing Administration on Friday, even as lawmakers warned that more needs to be done to combat rising foreclosures and a broader housing crisis.
"This is not the only step we need to take to get us through the subprime morass," Sen. Tom Carper (D., Del.) said during floor debate.
The chamber voted 93-1 in favor of the legislation, which would increase the sizes of loans FHA could insure, make counseling more available to homeowners and lower down payments for borrowers getting an FHA loan.
Supporters hope the agency, which is a division of the Department of Housing and Urban Development, can help stem the rising tide of foreclosures that have roiled world credit markets.
"This legislation is a perfect example of the kind of help that Americans are looking for," Sen. Charles Schumer (D., N.Y.) said during debate.
The Senate legislation would increase the size of loans the FHA is allowed to insure for first-time and low-income homeowners. The level would be set at the size of mortgages Fannie Mae and Freddie Mac are allowed to purchase, currently tabbed at $417,000 and referred to as the "conforming loan limit."
Additionally, the Senate bill would require homeowners to make a cash investment of at least 1.5% in the value of a home. That is half what the FHA currently requires.
The House of Representatives passed its version of the legislation in September, and the White House has said it supports congressional efforts to modernize FHA.
If enacted, the legislation would mark the first major piece of legislation passed this year aimed at addressing the rampant problems in the mortgage markets.
Senate Majority Leader Harry Reid (D.,Nev.) warned lawmakers about the cost of inaction on the issue.
"As bad as the crisis is now, there's reason to believe we are only in the initial stages," Mr. Reid said. "It's no exaggeration to say the national economy is at risk."