By Vicki Needham - 08/05/10 06:49 PM EDT
The legislation is nearly identical to one of the key provisions of the broader FHA Reform Act, which passed the House in June but has yet to be considered by the Senate. The House passed this measure July 30 before leaving for the August recess.
"While premium increases are never ideal, this bill was necessary to help improve the strength and stability of FHA’s single family programs," said Robert Story Jr., chairman of the Mortgage Bankers Association. "We are encouraged that FHA Commissioner [David] Stevens has indicated he may not need to raise premiums to the maximum, and we believe that a small increase in the annual premium, coupled with a decrease in FHA’s upfront premium, will help stabilize FHA while lowering closing costs for many borrowers."
The Senate also cleared a bill that will increase FHAs multifamily housing insurance programs by $5 billion for the rest of the fiscal year.
Without the increase, FHA would have exhausted its current authority in mid-August and would have been forced to stop issuing any commitments to insure the loans in their current pipeline of applications until Oct. 1, the start of fiscal 2011.
"FHA’s multifamily programs have been a critical source of funding to build and renovate multifamily and rental housing during the recent credit crunch," Story said.