The House approved legislation 348 to 72 that lawmakers on both sides of the political aisle said would give low- and moderate-income homeowners an alternative to subprime mortgages and help struggling borrowers.
Also Tuesday, the House Financial Services Committee approved a bill by voice vote that would extend the power to define unfair and deceptive practices to the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency.
Among other things, the mortgage bill would increase the maximum size of loans the Federal Housing Administration could insure to $500,000, allow it to accept zero-down loans, and give it leeway to charge riskier borrowers higher premiums. It also would direct the FHA to provide its services to qualified but higher-risk borrowers while limiting fee hikes.
Lawmakers said the bill was even more urgent given ongoing problems in the subprime mortgage market.
"We are all aware of the turmoil in the mortgage market, with a dramatic rise in foreclosures. … Equally troubling is the widening impact that the mortgage crisis is having within the domestic and global economy," said Rep. Maxine Waters, D-Calif., the lead sponsor of the bill. "This legislation will not by itself resolve the crisis. … Revitalizing FHA, however, is an essential element of a comprehensive strategy."
In a conference call with reporters after the vote, FHA Administrator Brian Montgomery said the bill could bring as many as 200,000 additional borrowers into his agency's program. The legislation is aimed at boosting the dwindling percentage of loans backed by the FHA — which often have more traditional features like longer fixed-rate periods — by making the program a more attractive option for lenders and borrowers.
Though Republicans and Democrats alike praised the measure, it was not without controversy. House Financial Services Committee Chairman Barney Frank, D-Mass., and two California lawmakers, Reps. Dennis Cardoza and Gary Miller, offered an amendment to raise the FHA loan limit to $500,000 and give the Department of Housing and Urban Development the power to raise the limit higher when market conditions warrant it.
A bill the House Financial Services Committee passed in May would have allowed the FHA to insure loans of up to $417,000.
The amendment was passed by voice vote, despite objections from the White House and some House Republicans.
Rep. Frank said the limit increase would help the FHA handle refinancings, and he urged the Senate to follow suit in raising limits for the FHA and for Fannie Mae and Freddie Mac when it considers reform of the government-sponsored enterprises.
The Senate Banking Committee is scheduled to vote on a similar bill today. In a brief interview before the House debate, Rep. Frank said that he believes the Senate will adopt such an increase in the FHA loan limit.
Sources said Sen. Schumer is considering offering an amendment during the vote that would raise the ceiling on FHA-insured loans to $500,000. The National Association of Home Builders and the National Association of Realtors support the provision, but groups like the Mortgage Bankers Association oppose it.
By voice vote, the House also approved an amendment sponsored by Rep. Patrick Tiberi, R-Ohio, that would require counseling for borrowers who do not make a down payment or who are deemed a high credit risk because of their credit scores.
Earlier in the day the House Financial Services Committee agreed to a bill by voice vote that would extend the power to define unfair and deceptive practices to the FDIC and OCC.
Currently only the Federal Reserve Board and the Office of Thrift Supervision can write such rules for banks, but Rep. Frank said handing the power to the other agencies is necessary to make up for the Fed's failure to curb abusive lending practices.
The bill would let the agencies work jointly to the "extent practicable" to write rules banning unfair practices.
