Bank and thrift lenders won a hard-fought victory May 26 as a panel of the House Banking Committee reported out housing reauthorization legislation that defers action on a proposal that would raise the ceiling on FHA-insured loans to the same level as allowed on conventional mortgages, $203,150.
Lenders and mortgage insurers will now have to sustain that momentum during markup of the legislation before the full House Banking Committee, action now scheduled for the week of June 16.
The compromise ironed out in tough behind-the-scenes negotiations calls for a deferral of action on increasing the FHA ceiling for loans in high-cost areas to the conventional mortgage ceiling until the bill is taken up by the full committee. Insured lenders are hopeful they can then persuade the panel to delay action on such an increase until a study is completed on the future of the FHA mortgage programs - which HUD Secretary Henry Cisneros will announce May 31 - something that will not be available until next year their adversaries on the issue are members of Congress from suburban areas and mortgage lenders.
In return for delaying a vote on the $203,150 FHA loan ceiling until full committee markup,the panel agreed to increase the ceiling on FHA-insured mortgages in most areas of the country to $77,500 from $67,500. The Housing Subcommittee also approved an amendment that included language sanctioning a risk-sharing system with states.
Under the amendment, pushed by Rep. Peter Deutsch, D-Fla., the FHA loan ceiling for high-income areas remains $151,650, but state housing finance agencies could insure loans for the difference up to the conventional ceiling of $203,150. Under the plan - part of a manager's amendment to the bill, H.R.3838 - home buyers wouldn't qualify for this program unless they had been turned down for a conventional loan within six months of applying for insurance under the program.
That compromise, acceptable to the mortgage banking industry, helped delay a vote until the full committee of an amendment proposed by Rep. Herbert Klein, D-N.J., that would raise the ceiling on FHA-insured loans to the same level as the limit on conventional mortgages - a proposal regarded as anathema by mortgage insurers and lenders, especially savings and loans. The compromise also delayed action on an amendment proposed by Rep. Bruce Vento, D-Minn.,that would raise the FHA insurance ceiling on loans outside high-income areas to 85% of the national median housing cost, estimated by Vento at $91,000.
Vento agreed to delay a vote on his amendment pending disclosure of the annual audit of the Mutual Mortgage Insurance program. The audits enable Congress to see if the MMI program meet or exceeded its statutory short-term capital targets.