WASHINGTON Sen. David Vitter is vowing to push for "tough" reforms to the Federal Housing Administration when the Senate Banking Committee takes up a bill to implement key changes at the agency on Wednesday.
The legislation, drafted by Chairman Tim Johnson, D-S.D., and Sen. Mike Crapo, R-Idaho, the top Republican on the banking panel, would modify a number of FHA policies, raising its capital reserve requirement to 3% and mandating annual minimum increases in insurance premiums paid to the agency.
Vitter said Tuesday evening that he's planning to introduce several amendments to the bill to further shore up the housing agency, including a provision to require the Department of Housing and Urban Development and the Treasury Department to notify Congress if Treasury makes a transfer for FHA to bolster its waning cash reserves. The agency is expected to know by September if it is facing a projected capital shortfall and will need to request funds from Treasury for the first time in its 79-year history. The Obama administration earlier this year estimated the agency could need close to $1 billion due to losses in its reverse mortgage program.
"It's clear the FHA has been going down an irresponsible path for years, from their drastic deficits to secret stress tests," Vitter said in a press release. "Instead of managing their funds responsibly, FHA prefers to lean on taxpayers to bail them out. Serious reforms are needed to make sure we protect against any taxpayer funded bailouts in the future."
The Louisiana Republican is also expected to propose an early-term delinquency review, a lifetime ban on additional FHA-backed loans for borrowers with two foreclosures, a capital reserve requirement for FHA's new multi-family program and an annual Federal Reserve Board stress test of FHA.