Washington, D.C. – December 16, 2011 – (RealEstateRama) — U.S. Sen. David Vitter has introduced a bill to reform the Federal Housing Administration by requiring its mortgage insurance fund to be recapitalized, and to prevent secret bailouts by the U.S. Treasury Department. Some reports show that FHA is on the brink of asking Congress for a taxpayer bailout of $50 to $100 billion.
“I certainly don’t want the FHA to ask Congress or the Treasury Department for a bailout, which I’m afraid could happen sooner rather than later,” Vitter said. “The FHA has been violating the congressionally mandated ratio of capital they must keep in their mortgage insurance fund since 2009. It is their responsibility to manage their funds responsibly and keep their books in order. There is no way FHA could operate like that if they were a private bank, and we need to hold them accountable.”
Vitter’s bill is cosponsored by U.S. Sens. Mike Crapo (R-Idaho), Mike Johanns (R-Neb.), Pat Toomey (R-Penn.), Jim DeMint (R-S.C.), Rand Paul (R-Ky.), Jim Risch (R-Idaho), John Cornyn (R-Texas) and Mike Lee (R-Utah).
Here is a summary of the Vitter FHA Reform Bill:
• Requires that HUD Secretary, and FHA Commissioner, use all available methods under law to recapitalize the MMI fund to its statutorily required 2 percent capital reserve ratio within two years
• Assesses penalties if the fund fails to maintain a ratio of 2 percent
• Prohibits secret bailouts of the FHA by the Treasury Department
Earlier this week Vitter opposed Carol J. Galante, President Obama’s nominee to be the commissioner of the Federal Housing Administration, in the U.S. Senate Committee on Banking, Housing and Urban Development. Galante is currently the acting commissioner at FHA. Vitter stated, “the status quo is not good enough, which is why I encouraged my colleagues to oppose Ms. Galante’s nomination.”
The NY Times reported that Ms. Galante claims that the chances the FHA will need its first bailout are slim and that if they agency got to that point, it would consider several measures, including raising the FHA insurance premiums borrowers pay.