By Vicki Needham, Peter Schroeder and Bernie Becker - 02/05/13 11:58 PM EST
The hearing will feature housing experts: Edward Pinto from the American Enterprise Institute; Anthony Sanders, professor of real estate finance at George Mason University; Basil Petrou, managing partner of Federal Financial Analytics; and Julia Gordon, director of housing finance and policy at the Center for American Progress.
"Lawmakers should actively debunk the idea that the FHA is a safe haven for those who strategically defaulted on previous mortgages," wrote NAFCU President and CEO Fred Becker.
"This risk to the taxpayer, encouraged by current FHA policy, is a critical part of the safety and soundness conversation that must be reviewed."
In crafting a solution, lawmakers should ensure that policies do not unintentionally create an incentive for borrowers to walk away from their mortgages, the group said.
The FHA’s current policy bars any borrowers who strategically default from obtaining another FHA loan for a minimum of three years. Fannie Mae has put into place a policy that would prohibit those borrowers for seven years.
The FHA recently vowed to provide additional enforcement for servicers soliciting borrowers with the false pretense that they can “automatically” qualify for an FHA loan after three years without meeting other requirements.
Still, NAFCU remains concerned about the FHA’s general policy on this issue and encourages Congress to exercise additional oversight.
Recently, Sen. Bob Corker (R-Tenn.), a member of the Senate Banking, Housing and Urban Affairs Committee, said he is pleased with recent changes at the FHA designed to get the agency on a path toward solvency.
In December, Corker secured a commitment from Carol Galante, FHA's commissioner and assistant secretary for Housing, to overhaul FHA's underwriting requirements to deal with substantial losses, primarily caused by a reverse mortgage program.
Galante announced a series of changes last week to help the agency better manage risk and further strengthen the health of the Mutual Mortgage Insurance Fund (MMI).
The agency estimates that the MMI Fund has lost billions of dollars in premium revenue on mortgages endorsed from 2010 through 2012 because of this automatic cancellation policy.
FHA will once again collect premiums based upon the unpaid principal balance for the entire period for which FHA is entitled.
"This will permit FHA to retain significant revenue that is currently being forfeited prematurely," the FHA said.
WHAT ELSE TO WATCH FOR
Attack plan: House Republicans are set to advance another bill pressuring Democrats on budgetary matters on Wednesday. The Require a PLAN Act would require the president to submit a budget that either balances the budget in a decade, or at least identifies when his policies would bring the budget back into balance.
The rule for the bill cleared in a largely party-line vote Tuesday, setting the stage for more of the same on its actual passage tomorrow. Senate Democrats and the White House have been mum on the bill, but it is hard to envision it gaining much traction after the House passes it.
Budget study: CBO Director Douglas Elmendorf will testify before the House Budget Committee on Wednesday to discuss the nation's fiscal health.
On Tuesday, the Congressional Budget Office (CBO) released a report forecasting that the deficit will drop below $1 trillion this year for the first time in President Obama's tenure.
The nonpartisan agency projected a federal budget deficit of $845 billion, which, while it looks better, is still expected to bring plenty of tough questioning from House Republicans who are now pushing a plan to balance the budget in 10 years.
The hearing comes a day after panel Chairman Paul Ryan (R-Wis.) criticized President Obama for failing to meet a budget deadline. Republicans are now trying to require him to present a balanced budget.
That led Rep. Steny Hoyer (D-Md.) to call GOP demands "hypocritical" for pressing the White House to produce a balanced budget although Republicans haven't produced such a plan themselves.
Rain, snow, sleet, deficits: Postmaster General Patrick Donahoe is scheduled on Wednesday to discuss the Postal Service's efforts to speed up their cost-cutting efforts.
USPS's Board of Governors had asked the agency to quicken the pace last month, as lawmakers continue to discuss ways to give the Postal Service legislative authority to make further changes.
The Senate Homeland Security Committee, which has jurisdiction over USPS, has scheduled a hearing next week to further discuss postal reform efforts, after the last Congress ended without a bill getting enacted.
Let the retreats continue: The House Democratic Caucus heads a short distance outside of Washington to the Lansdowne Resort in Ashburn, Va., for a couple of days of gelling on a wide array of issues from budget and fiscal matters, to immigration and gun control.
Meanwhile, Senate Democrats kick off their second day in Annapolis with a special guest, President Obama, who will deliver remarks. Finding alternatives to spending cuts in the scheduled sequester could rise to the surface at the meeting following the president's announcement on Tuesday calling on lawmakers to delay sequester spending.
Talking about debt: The Bipartisan Policy Center (BPC) will hold a discussion on Wall Street and the debt-ceiling debate with some expert testimony from former World Bank President Robert Zoellick, Michael Hanson, senior economist at Bank of America Merrill Lynch Global Research and Beth Ann Bovino, senior economist at Standard & Poor's.
Timeout: President Obama wants Congress to delay at least part the remaining $85 billion in scheduled spending cuts to defense and domestic programs expected to take effect on March 1 to avoid any damage to the economy.
The president wants lawmakers to pass an alternative package of spending cuts and tax changes to stop the sequester.
The Congressional Budget Office (CBO) has estimated that allowing the sequestration cuts to go forward would lead to a 0.7 percent decline in the gross domestic product this year.
The Bipartisan Policy Center estimates it would cost the nation 1 million jobs in 2013 and 2014, while defense industry studies have predicted that more than 2 million jobs could be lost in defense and non-defense sectors in 2013.
Meanwhile, the Congressional Progressive Caucus floated their plan calling for nearly $1 trillion in tax increases and nearly $300 billion in targeted defense cuts over 10 years to replace nine years of across-the-board cuts.
The reduction in the budget deficit comes after Congress approved higher tax rates on households with annual income above $450,000.
CBO sees the deficit falling to $430 billion by 2015 before slowly rising again. By 2023, CBO projects the nation will be nearing the $1 trillion mark with a $978 billion budget deficit as the aging population and rising health costs explode entitlement spending.
Finding fault: Attorney General Eric Holder accused credit rater Standard & Poor's of "egregious" and fraudulent conduct as the federal government and several states brought civil charges against the firm.
Holder said S&P’s actions were at the “very heart” of the financial crisis and accused the firm of placing its own profits ahead of investors’ interests by “knowingly issuing inflated credit ratings” for risky mortgage securities.
"S&P misled investors, including many federally insured financial institutions, causing them to lose billions of dollars," Holder said.
House Republicans leaders Tuesday kept up pressure on the White House for failing to produce a budget on time, and vowed to advance a bill requiring a balanced budget from the Obama administration.
Budget buzz: GOP officials contended that the president's latest failure to submit a budget by Monday's legal deadline, coupled with nearly four years without a Senate budget, shows the Democratic party is not serious about tackling the nation's fiscal woes.
Now, they plan to advance a bill that would require the president to submit a balanced budget, or at least identify at what point in the future his fiscal plan would balance.
"It is a bill that frankly says to the president, you know, please join us in doing your job," said House Majority Leader Eric Cantor (R-Ohio).
Rating game: The Justice Department launched a civil suit against Standard & Poor's this week, and one Democratic lawmaker is looking to use it to mount fresh pressure on financial regulators.
Rep. Brad Sherman (D-Calif.) used news of the suit to press the Securities and Exchange Commission (SEC) to implement a proposal he backed that looks to eliminate conflicts of interest at the nation's credit raters. Currently, raters are paid by issuers looking for a rating, an arrangement that raises questions about conflicts of interest.
A proposal back by Sherman and Sen. Al Franken (D-Minn.) would create an independent agency that would dole out rating assignments to raters, removing the possibility of a quid pro quo. The Dodd-Frank financial reform law included a provision requiring the SEC to study the matter, and then implement such a board if no credible alternative could be figured out. Sherman said the lawsuit underlined the need to rejigger how raters obtained their business.
Fighting fraud: Hundreds of law enforcement officers from the FBI and the U.S. Postal Inspection Service on Tuesday arrested 13 people in four states for their alleged involvement in an international criminal scheme to create thousands of phony identities, fraudulently obtain tens of thousands of credit cards and steal millions of dollars.
The broad scope of the fraud includes more than 25,000 fraudulent credit cards with confirmed losses of more than $200 million, one of the largest cases ever handled by Justice.
MBA Mortgage Index: The Mortgage Bankers Association releases its weekly report on mortgage application volume.
WHAT YOU MIGHT HAVE MISSED
— Waters pressing for hearing on end of foreclosure review program
— U.S., U.K. leaders make push for trans-Atlantic trade deal
— Study: Tax haven use dries up state funds
— Service sector grows at a slower pace
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