WASHINGTON - Rep. Jerry Weller (R-Ill.) has introduced a bill to convert the FHA programs into a government-owned corporation independent of the Department of Housing and Urban Development, which presently administers the programs.

The Federal Mortgage Insurance Corp., as the new organization would be named, would continue to provide 100% insurance.

Like the present FHA programs, the new FMIC would insure loans to borrowers regardless of their income.

The bill is backed by 23 Republicans.

Warren Lasko, executive vice president of the Mortgage Bankers Association, said the trade group was pleased with the bill.

But he added, that another bill - this one being drafted by Rick Lazio, chairman of the House Banking subcommittee on housing - is likely to take a different tack.

Mr. Lasko said the New York Republican's legislation is likely to restrict the FHA program to first-time homebuyers or those below a certain income level.

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The FHA is losing market share and will continue to do so irrespective of any legislation, according to a new report from Goldman Sachs & Co., New York.

Any legislation that is enacted, however, is likely to benefit the mortgage insurance industry, the report says. "Some observers have argued that the potential scope of actual change might prove fairly modest, and if so, investors (in mortgage insurance companies) could be disappointed relative to some expectations of aggressive FHA reform and downsizing."

Others, the report notes, "have argued that the political wave in Washington will create legislation to downsize the FHA, limit its role as a mortgage insurer, and thus expand growth opportunities for the private mortgage insurance group."

The report, by analysts Robert G. Hottensen Jr., Richard K. Strauss, and Michael S. Hodes, concludes that some legislation is likely, but that it will be "more modest than originally proposed.

It says FHA has been losing market share because of the emergence of more sophisticated coinsurance and partner arrangements with local governments by Fannie Mae and Freddie Mac, and the general success of those two agencies, and because creditworthy borrowers have better alternatives.

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