Van Hollen Statement on the FHA Reform Act

I want to thank Chairman Frank and Chairwoman Waters for their efforts in bringing this important and necessary piece of legislation to the floor today.

As a result of the economic crisis, the Federal Housing Administration had to step in to fill the void that emerged when large numbers of homeowners experienced difficulty finding private companies willing to insure their mortgages. While increasing the number of loans it insured helped the FHA put more borrowers into new homes, it also severely depleted its capital reserves--causing them to fall below congressionally mandated levels.

One of the FHA's responsibilities is to provide mortgage insurance for low-income homeowners who otherwise would have difficulty accessing insurance. By providing insurance on loans made by approved lenders, the FHA has been able to guarantee the availability of inexpensive mortgages and help approximately 37 million borrowers. To insure that FHA has the resources necessary to continue performing this important function, Congress requires the FHA to maintain capital reserves of at least 2%. Under the economic strain of the past couple of years, these reserves have fallen well below that level. Even though the Department of Housing and Urban Development has taken significant administrative and regulatory steps to address the shortfall, as an added measure, the FHA has requested that Congress grant it the legislative authority to adjust its premium structure.

The bill we are voting on today provides the FHA with new authority to raise the annual premiums it receives from new borrowers with mortgages at or below 95% of the home's value. If this bill passes, FHA will be permitted to raise the premiums it receives on mortgage insurance to up to 1.55% of the loan balance. This move should enable the FHA to raise the funds it needs to restore its capital reserves to financial healthy levels--so that it can continue providing mortgage insurance to new home owners for many years to come.
Congress is committed to doing whatever it takes to get this economy going again, to get Americans back to work, to enable them to buy cars and homes and to start businesses. Our legislative efforts have taken many forms from small business tax cuts, to financial services industry reform to the measure we are considering here today.

This is important legislation that will help the economy by helping many borrowers seeking mortgage insurance. I urge my colleagues to join me in supporting this bill.

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