Senators Tim Johnson (D-SD), Chairman of the Senate Banking Committee, and Mike Crapo (R-ID), the Committee’s Ranking Member, released a discussion draft of the Federal Housing Administration Solvency Act of 2013, which would implement several reforms designed to improve the Federal Housing Administration (FHA) and to ensure the solvency of the Mutual Mortgage Insurance Fund.
This new measure reforms many of FHA’s programs including requiring the agency to charge a minimum annual mortgage insurance premium (MIP) of at least 55 basis points, authorizing FHA to conduct annual reviews of all FHA-approved mortgagees and allowing the agency to terminate a mortgagee’s approval nationwide, not just in certain locations as under current law. To to help protect against losses due to fraud, FHA would be given the authority to seek indemnification against FHA-insured mortgages that were insured through the lender insurance and direct endorsement programs. The measure would also require FHA to evaluate and revise as necessary FHA’s underwriting standards using criteria similar to the Consumer Financial Protection Bureau’s (CFPB) criteria for Qualified Mortgages and would establish a single resource guide for lenders and servicers regarding the requirements, policies, processes, and procedures that apply to loans insured by FHA.
The discussion draft also includes several risk management measures for FHA to adopt including the establishment of a Chief Risk Officer within FHA who would be required to conduct an annual study of the lowest performing loans. In addition, 180 days after the enactment of the Federal Housing Administration Solvency Act, the Government Accountability Office (GAO) would be required to examine HUD’s disclosure of FHA data and to consult with prominent academics with housing market experience in order to determine the relevance of the data that is disclosed.