Loan Modification

Housing Amendment Could Shut Down FHA

By Implode-Explode Heavy Industries

NationalMortgageNews reports:

Senate Democratic leaders want to pass an FDIC/housing bill on Tuesday but first they have to wade through a number of amendments including one that would require a temporary shutdown of the FHA single-family program if it is headed toward insolvency. The sponsor of the Federal Housing Administration amendment, Sen. David Vitter, R-La., says there are signs that FHA is a "ticking time bomb" and the government should be "very cautious" about expanding the FHA program. "My amendment would simply say that the first duty of the FHA is to maintain solvency," Sen. Vitter said. Industry groups, such as the mortgage cooperative Lenders One, are urging the Senate to reject the Vitter amendment. Shutting down the FHA program would be "devastating to the economy," and "shock" the housing and mortgage markets, Lenders One warns in a letter to the Senate. The FDIC/housing bill (S. 896) includes improvements to the FHA Hope for Homeowners program, legal protections for servicers and increases the Federal Deposit Insurance Corp.'s borrowing authority. The House has passed a similar bill (H.R. 1106). The House version contains a bankruptcy cramdown provision that the Senate has rejected.

If only. But someone should point out to Vitters that instead of shutting down FHA, they could just keep seller funded downpayment loans illegal and staunch much of the bleeding at the FHA.

Full post as published by Mortgage Lender Implode-o-Meter on May 04, 2009 (boomark / email).