House Financial Services Chairman Barney Frank suggested today other avenues to fund legislation for the Federal Housing Administration to guarantee up to $300 billion in new mortgages rather than diverting monies away from a new affordable-housing trust fund. In particular, Frank said he would explore using extra revenue from lifting a cap on FHA reverse mortgages as an option to pay for the FHA refinancing proposal. "We'll find other sources," Frank said at housing conference sponsored by the American Bar Association. "I think ... there are other ways we can do it." As the foremost congressional advocate for expanding affordable housing, Frank's top priority is protecting the trust fund as the House and Senate near negotiations on a major housing-stimulus package.
The House has passed its package and the Senate will take up its measure after the Memorial Day recess. Both measures would take a portion of Fannie Mae's and Freddie Mac's assets and siphon them off for a new trust fund, which is estimated to receive about $500 million annually. Both bills would allow FHA to guarantee new 30-year, fixed-rate mortgages for at-risk subprime borrowers, providing that their lenders voluntarily write down their current notes to below-market value. The Senate version narrowed the eligibility, bringing down its cost to $500 million, while the House version was more expansive, estimated to cost $1.7 billion by CBO. But at the insistence of Senate Banking ranking member Richard Shelby, the Senate bill paid for the FHA refinancing plan by diverting the funds intended for the trust fund in its first few years of operation. That stance has forced Frank to examine other avenues to pay for the FHA refinancing plan as he gears up for conference negotiations. By lifting the cap on the FHA reverse-mortgage program, Frank said, the measure could bring in $300 million annually. He noted that raising the FHA loan limit would raise tens of millions of dollars annually, and he wants the cap to go up to almost $730,000. Shelby opposes permanently raising the limit beyond $550,000.
Frank will press his case by arguing that the House bill would allocate the first year of trust-fund monies to areas affected by 2005's Hurricane Katrina in an effort to help those communities rebuild, and is looking for allies in the Senate such as Sen. Mary Landrieu, D-La., who has been successful with various Senate bills in attaching Katrina-related language beneficial to her constituents. Shelby noted his state was also affected by Katrina. "We got a nationwide housing crisis here we're going to continue to deal with. We continue to deal with Katrina. We will because we care what happened in Louisiana, Mississippi and my state of Alabama," Shelby said Tuesday.
This article appears in the May 24, 2008, edition of National Journal Daily PM Update.