Biggert Announces Subcommittee Hearing On Proposal To Strengthen FHA, RHS, and Ginnie Mae
May 23, 2011 -
Insurance, Housing and Community Opportunity Subcommittee Chairman Judy Biggert announced today the Subcommittee will meet for a legislative hearing on reforming the Federal Housing Administration, the Rural Housing Service, and Ginnie Mae. The hearing will take place on Wednesday, May 25 at 10 a.m. in room 2128 Rayburn.
The hearing is part of the Financial Services Committee’s ongoing effort to build a stronger housing finance system that protects taxpayers from future bailouts and encourages the private sector to reenter the mortgage market.
Subcommittee Chairman Biggert said, “The FHA, RHS, and Ginnie Mae play a major role in the mortgage finance market, and reform of these agencies is critical to restoring stability and strength to the housing sector. The Subcommittee will explore reforms to improve their financial condition, enhance lender enforcement tools, and bring private sector capital back into the market. Our goal is to determine a future role for these government mortgage programs that strikes the right balance for taxpayers and homebuyers."
The hearing will focus on a draft legislative proposal, which can be viewed here, to protect taxpayers, including giving HUD the authority to disqualify poor quality lenders from participating in the program; establishing an independent chief financial officer for Ginnie Mae and a new Deputy Assistant Secretary for Risk position at FHA; and requiring a 5 percent down payment for all FHA loans. The Rural Housing Service, under the discussion draft, would be moved to the Department of Housing and Urban Development where its mission to serve rural areas would be strengthened using the housing expertise and financial tools available in the Department.
Financial Services Committee Chairman Spencer Bachus said, “This hearing and legislative proposal come at a pivotal moment, as the Committee debates the future of the mortgage finance system, and in particular, government guarantee programs that could expose taxpayers to significant losses.”
The FHA insurance program was established in 1934 to insure mortgages made by private lending institutions. The program was intended to be self-funded. Mortgages backed by the FHA carry an explicit 100 percent government guarantee in the event a borrower defaults. The recent increase in delinquencies and foreclosures across the nation has had a detrimental impact on the financial health of the FHA. In November 2010, the annual actuarial report on FHA’s financial position found that the capital reserve ratio for the Mutual Mortgage Insurance Fund was 0.50 percent, well below the statutorily mandated level of 2 percent.
Witnesses scheduled to testify:
Katie Alitz, President, Council for Affordable and Rural Housing
Michael D. Berman, Chairman, Mortgage Bankers Association
Mark Calabria, Director of Financial Regulation Studies, Cato Institute
Peter Carey, Director of Self-Help Enterprises, Inc.
Brian Chappelle, Partner, Potomac Partners
Peter W. Evans, Partner, Moran and Company
Basil Petrou, Managing Partner, Federal Financial Analytics, Inc.
Ron Phipps, President, Phipps Realty
Barry Rutenberg, First Vice Chairman, National Association of Home Builders