For FHA, a Huge Task and Uncertain Role

Washington Post (05/07/08) P. D1; ElBoghdady, Dina
Many lawmakers believe the FHA is the key to healing the housing and mortgage markets, with the House of Representatives scheduled to vote May 7 on legislation that would allow it to insure another $300 billion in mortgages and modernize the agency. However, there are concerns about the agency's finances, with officials noting that boosting loan volume to allow poorer-quality borrowers will cancel out any gains from more creditworthy borrowers. FHA commissioner Brian Montgomery says the legislation should include a provision to prohibit seller-funded down-payment assistance, noting that a decline in performance of such loans could prompt the agency to request its first appropriations since its inception more than seven decades ago. Despite the strain on the agency's finances, House Financial Services Committee Chairman Barney Frank, D-Mass., says taking advantage of the FHA's capabilities makes more sense than establishing a new agency, which would make a quick response to the mortgage crisis impossible.