House Rep. John Adler (D-New Jersey) has introduced the 21st Century FHA Housing Act of 2009, intended to essentially update the Federal Housing Administration (FHA) so that its single-family mortgage insurance program - a program for which demand and market share has soared in recent months - can continue as an affordable way for families to obtain the American dream.
The bill would provide additional resources to increase staff and provide additional training and education programs for personnel. It also allocates funding to be invested in upgrading the agency’s outdated technology systems, and gives the HUD secretary the flexibility to develop ""alternative methods of avoiding foreclosure.""
Section five of the bill also explicitly calls for FHA to improve risk management, with reviews of delinquencies among recent originations and stronger lender monitoring. It would require the agency to conduct ongoing reviews of mortgages originated during the preceding 12 months, in which the mortgagor has fallen 60 or more days behind on their payments during the first 90 days of the term.
The reviews would be used to determine which mortgages should not have been originated or insured and which lenders have relatively high incidences of delinquency. It authorizes funding over the next four years for 90 additional full-time staff members to carry out this task, and requires agency officials to closely monitor and analyze the performance of lenders for a one-year period to promote earlier identification and intervention of problem lenders.
The bill also states that the Treasury secretary, HUD secretary, and the director of the Federal Housing Finance Agency (FHFA) should use their existing authorities to provide the financial support and assistance necessary to increase warehouse lending - a credit facility the lawmakers called ""a critical link in the housing finance chain.""
The 21st Century FHA Housing Act is currently being reviewed by the House Financial Services Committee, and a similar bill is expected to make its way to the Senate soon.
According to a report from the Mortgage Bankers Association last week, the government-insured share of mortgage applications - including FHA and Veterans Affairs (VA) loans - accounted for 35.9 percent of all mortgage applications in June. By comparison, that figure stood at about 27 percent in May. Just four years ago, the government-insured share of applications was less than 6 percent of all applications.
Last month, FHA endorsed 94,069 single-family home loans - the most in a single month period in nine years, the agency said. The insured loans included more than 48,000 refinances, over 41,000 purchase transactions, and more than 4,200 FHA-backed reverse mortgages.
Friday signaled another progressive step for the federal mortgage insurer, when the U.S. Senate unanimously confirmed David H. Stevens, former president and COO of the Long and Foster Companies, to the post of FHA commissioner and HUD’s assistant secretary for housing.
Stevens will oversee the FHA mortgage insurance fund and HUD's major housing programs. He succeeds Brian Montgomery, stepping into the role at a time when demand for FHA-backed loans has soared and the agency’s support is seen as critical therapy for the ailing housing market. Stevens is expected to be sworn in and begin work at the agency this week.