Several Senate Banking Committee members backed overhauling the government's mortgage insurance program to create an alternative to higher-cost subprime loans.

The members were speaking at a committee hearing Wednesday on the Bush administration's plan to reform the Federal Housing Administration, but it was halted abruptly as Senate Republicans used a parliamentary maneuver to prevent all hearings while the Senate was in session.

Before the hearing was interrupted, Sen. Charles Schumer said he introduced a bill late Tuesday that would raise the FHA loan limit in high-cost areas by about 15%, to $417,000.

"In recent years we've seen a sharp decline in the number of safe and affordable FHA-insured loans sold … because the FHA has not adapted to the realities of the changing real estate markets," the New York Democrat said. "Median housing prices in suburban areas throughout America far exceed the limits imposed under current FHA rules."

Sens. Robert Menendez, D-N.J., Mike Crapo, R-Idaho, and Mel Martinez, R-Fla., also said they support FHA reform, but they disagreed on some details.

The changes proposed by the Bush administration include raising the loan limit to $417,000, pricing FHA premiums according to borrower risk, and letting the FHA insure zero-down-payment loans.

Though he did not attend the hearing, Senate Banking Chairman Chris Dodd wrote in an e-mail that he wants to craft a bipartisan bill that the committee can pass this month.

"Far too many consumers have been stuck in abusive subprime loans, and a reinvigorated FHA can help offer American homebuyers a much safer and more stable alternative," the Connecticut Democrat wrote. "I am continuing to work to draft legislation to reform the FHA, and am working with … [fellow senators] to find common ground on this important issue."

After the hearing Sen. Martinez, a former Housing and Urban Development Department secretary, said that he was not sure the FHA loan limit needs to be raised as much as Sen. Schumer or the administration has suggested.

"I'm not sure about that high, but yes, I would support a raising of the limit," Sen. Martinez said. "And I think that the administrative end of FHA needs to be quicker … so that they can be competitive in terms of timeliness when people apply."

He also said it is "very, very important" for premiums to be risk-based, but he objected to FHA coverage of loans without down payments. "I'm not real keen on zero down payment. I think that people need to have an investment in their home."

During their opening statements, Sen. Richard Shelby of Alabama, the committee's top Republican, and Sen. Elizabeth Dole, R-N.C., raised other concerns about the program's management, and they urged a cautious approach to reform.

"According to the president's budget submission, the FHA, for the first time in its history, will lose money this fiscal year," Sen. Shelby said. "Before the taxpayer is faced with greater losses, I believe we must determine how the FHA got into this position and how it intends to get out."

Sen. Shelby has opposed FHA reform in the past.

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