March 16, 2010
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On March 11, Federal Housing Administration (FHA) Commissioner-Assistant Secretary for Housing David Stevens testified before the House Financial Services Subcommittee on Housing and Community Opportunity on the FHA Reform Act of 2010 and the HUD FY 2011 Budget request.  The FHA Reform Act, proposed by the Administration and not yet introduced, would allow HUD to increase FHA’s annual single-family mortgage insurance premium and terminate HUD approval of nationwide lenders for violations committed by local branches. 

Stevens told the Committee that the President's FY 2011 Budget balances FHA's three key responsibilities:  responsibly providing homeownership opportunities; acting as a counterbalance for the housing market during difficult economic times; and ensuring the financial health of the FHA Mutual Mortgage Insurance (MMI) Fund.
 
Stevens said HUD has taken several steps to shore up the insurance fund while promoting homeownership and economic recovery, including increasing its lender enforcement activities, raising the upfront FHA single-family mortgage insurance premium, and imposing new credit score and down payment guidelines.  HUD’s new guidelines exclude borrowers with FICO scores below 500, who currently make up 31 percent of all seriously delinquent FHA loans, and require borrowers with FICO scores of less than 580 to make down payments of at least ten percent.
 
Additionally, to ensure the continuing stability of the MMI Fund, Stevens proposed increasing the annual FHA single-family mortgage insurance premium, reducing the maximum permissible seller concession, and increasing lender responsibility and enforcement.  Legislation is necessary to authorize HUD to increase the annual premium .
 
In a response to a question posed by Representative Scott Garrett (R-NJ), Stevens said the Administration believes the Congressional Budget Office's (CBO) assessment of net FHA receipts was too conservative.  While the Administration forecasted $5.8 billion in net receipts for FHA, the CBO estimated the net savings to be $1.9 billion.  Stevens acknowledged the varying views on home price forecasts, default rates, and other factors, but reiterated the Administration's confidence in its prediction.
 
An archived webcast of the hearing is available at the House Financial Services Committee website. NCSHA’s analysis of the HUD Budget is available here.