Vitter Says Reforms to FHA, Not a Bailout, Needed to Revive Housing Market

Washington, D.C. – February 28, 2012 – (RealEstateRama) — U.S. Sen. David Vitter today offered the following statement after a hearing in the U.S. Senate Banking Committee on the state of the housing market.

“It seems that the administration’s main proposal to revive our struggling housing markets is to move more people onto the Federal Housing Administration’s dime. There’s one pretty big problem with that, though – the FHA is broke,” Vitter said.

Since 2009, the FHA has been violating the congressionally mandated ratio of capital it must keep in its mortgage insurance fund. Vitter has introduced legislation to reform the FHA and make sure it can remain solvent without a federal bailout.

Vitter added, “The FHA has a 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. And I certainly don’t believe that giving even more power to the FHA is going to fix what’s broken in the housing market.”

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 two percent capital reserve ratio within two years.
• Assesses penalties if the fund fails to maintain a ratio of two percent.
• Prohibits secret bailouts of the FHA by the Treasury Department. Treasury currently has authority to make a “credit transfer” to FHA and doesn’t need Congressional authority to do so.