House Passes FHA Solvency Legislation


On September 11, the U.S. House of Representatives voted overwhelmingly to pass legislation that seeks to bolster and protect FHA capital reserves. The bill, H.R. 4264, would set a minimum 0.55% annual premium and would increase the maximum annual premium from 1.55% to 2.05% for all FHA-insured single-family mortgage loans. The bill also would authorize the Secretary of Housing and Urban Development to require lenders to indemnify the FHA for claims paid on loan, if the lender knew or should have known that the loan included serious or material violations of FHA requirements under the direct endorsement program, regardless of whether the violations caused the loss. In cases of fraud or misrepresentation in connection with the origination or underwriting of a loan on which the FHA suffers a loss, the Secretary would be required to seek indemnification from the lender. As a condition of obtaining FHA lending approval, lenders would be required to notify HUD if the lender terminates purchases of FHA mortgages or servicing rights from another FHA lender based on evidence of fraud or material misrepresentation. Finally, under the bill, lenders could have their approval to originate and underwrite FHA mortgages terminated if their delinquency rates are comparatively high.


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