Federal legislation giving the Federal Housing Administration increased power to recoup losses on bad loans is not likely to pass in the Senate by the end of the year because of Republican opposition, according to the Wall Street Journal. The bill would give the FHA the power to force lenders to cover the cost of a defaulting loan, if the agency discovers a serious violation of federal lending standards, raising much needed cash.
The bill “is a necessary and responsible step to protect taxpayers given the short amount of time left in the legislative session,” Sen. Tim Johnson, the Senate Banking Committee’s chairman, wrote in a letter last week.
But despite passing with an overwhelming majority in the House in September, Senate Republicans are arguing that the bill is an inadequate response to an audit released last month that found that the FHA’s reserves cannot cover projected losses over the coming years. The agency is expected to soon reach an estimate $16.3 billion deficit.
“The latest independent actuary’s report makes clear that a taxpayer funded bailout of FHA is virtually inevitable,” Sen. David Vitter said in a statement. “We need major, mandatory reforms of FHA in light of that. The House bill doesn’t include these, in part because it was drafted last March, before FHA went so much further south.” [WSJ] –Christopher Cameron