WASHINGTON -- A US House panel voted to expand a federal agency's powers to help low-income borrowers at risk of losing their homes as Congress pushes legislative fixes for the subprime mortgage crisis.
The House Financial Services Committee approved legislation yesterday to let the Federal Housing Administration refinance more subprime mortgages. The panel's 45-19 vote in Washington sends the legislation to the full House.
The agency "has a very useful role to play in supplementing the market," Representative Barney Frank, the Massachusetts Democrat who chairs the committee, said during the panel's consideration of the measure. "If we can get people into the FHA rather than to some of the other kinds of loans they have, everybody will be better off."
Congressional lawmakers have expressed concern in a series of hearings this year that rising default and foreclosure rates among borrowers with weak credit will force thousands of people out of their homes. The House legislation is one of the first formal steps in Washington to address the problem.
The proposal would direct the FHA to underwrite mortgages for people with higher credit risk who would otherwise be driven to subprime loans and expand access to FHA protection by increasing qualifying loan limits in high-cost areas. The legislation was introduced in March by Frank and Representative Maxine Waters, a California Democrat.
The Washington-based FHA, an agency within the US Department of Housing and Urban Development, insures loans made by private lenders to low-income, minority, and first-time homebuyers. The mortgages generally have interest rates 3 to 4 percentage points lower than subprime loans, the agency said.
Republican lawmakers objected to a provision of the legislation that would steer the agency's surplus revenue to a new affordable housing fund.
"I think that taking the funds out of the FHA and using them for a purpose unrelated to its core mission would threaten the solvency of the FHA fund and its ability to pay out insurance claims," said Representative Judy Biggert, a Republican from Illinois.
Biggert said the funds should be available as more FHA-insured loans will be made to riskier subprime borrowers.
Late payments on subprime loans reached a four-year high of 13.3 percent in the fourth quarter, according to the Mortgage Bankers Association.