Congress Might Pass Separate FHA Reform Bill in 2014

Mortgage & Real Estate

The improving financial position of the Federal Housing Administration mortgage insurance fund leaves the door open for Congress to pass a stand-alone FHA reform bill in 2014, according to a Wall Street analyst.

If House and Senate banking committee leaders decide a larger housing finance reform bill that also addresses the future of Fannie Mae and Freddie Mac is out of reach next year, they could easily pull out FHA reform and just get that done, says FBR Capital Markets policy analyst Edward Mills.

The political hurdle is the willingness to tackle just FHA reform as a stand-alone bill, Mills told NMN.

He expects House and Senate banking committee leaders will decide next summer whether to pursue broader GSE reforms or just pass a FHA bill. The House and Senate came very close to passing a bipartisan FHA reform bill in 2012.

The FHA actuarial report released last week shows the FHA single-family program has $48 billion in liquid assets to pay claims and the forward program will have a positive net worth of $7.8 billion by Sept. 30, 2014.

The improving performance of the FHA fund reduces the threat of large-scale congressional changes to the program that could have contracted credit availability, Mills says in a Dec. 16 policy update report.

FBR Capital Markets analysts expect that Congress will eventually pass a FHA reform bill similar to the one the Senate Banking Committee approved by a 21-1 vote last July.

We continue to believe that this legislation could become law following further delays of the larger housing reform efforts, the FBR policy update says.

The House Financial Services Committee passed a housing finance reform bill last summer that includes several controversial FHA reform measures. All the committee Democrats and a few Republicans voted against the bill. So far, Republican leaders have not allowed the full House to vote on the measure.

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