House Dems reintroduce measure to bolster housing finances

A pair of top Democrats on the House Financial Services Committee is renewing its push to strengthen the finances of the Federal Housing Administration (FHA).

Rep. Maxine Waters (Calif.) and Michael Capuano (Mass.) reintroduced legislation Thursday that would give the FHA more tools to pursue claims against mortgage loan originators with shoddy underwriting or high losses the FHA has assumed as the guarantor on those home loans. Waters is the ranking member of the full committee, and Capuano is the top Democrat on its Housing subcommittee.

A similar measure was cleared by the full House in the last Congress, and Waters called on members to quickly pass it again, clearing the way for further reforms for the FHA.

"Working with the administration, we plan on drafting additional legislation to give FHA more tools to bolster its insurance fund," she said. "But this is an important first step, and should be considered immediately, given that it was supported on such an overwhelming, bipartisan majority in the last Congress."

The FHA is staring at potentially billions of dollars in losses; its insurance fund has taken a hit in the wake of the subprime mortgage crisis. Its troubled finances have been a hot topic on Capitol Hill, and Republicans have contended that the FHA had overstepped its boundaries in guaranteeing mortgages, and was crowding out private-sector investment.

Meanwhile Democrats have contended the FHA stepped up to the plate during the housing downturn to ensure the continued flow of affordable credit, and now needs help digging out from those depths.

Under this new bill, the FHA would have more powers in demanding indemnification for loans it guaranteed that turned out to be improperly underwritten.

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