The US senate passed the Federal Housing Administration (FHA) bill, which was approved 93-1, in its first attempt to tackle the subprime mortgage crisis through legislation.
The FHA presently insures 3.7 million mortgages, but detractors argue that the size of mortgages the agency can support is not large enough to attract borrowers in wealthier areas such as California and the Northeast.
As a result, FHA’s share of the single-family mortgage market has dropped to approximately 4%, down from 19% a decade ago.
The bill will allow the FHA to back refinanced loans for thousands of borrowers who are behind on payments because their mortgages are rising dramatically. The bill raises the maximum mortgage the FHA can insure in high-cost areas from $362,790 to $417,000.
“We applaud efforts to expand safe, low-cost loan options for potential home buyers, and modernizing the Federal Housing Administration’s mortgage insurance program is one effective way to achieve this goal. In addition, we support making refinancing options for existing homeowners as robust as possible as a means to preserving the dream of home ownership in this country,” says the Securities Industry and Financial Markets Association (SIFMA) and its affiliate, the American Securitization Forum (ASF), in a joint statement.
The Senate passed similar legislation in September 2007. The two chambers must now come to reach a compromise on the new legislation before sending it to the White House for approval.