Sen. David Vitter (R-La.) said recently the Obama administration’s plan to increase the availability of home loans to families with lower credit scores is reminiscent of the housing market collapse.
The Obama administration has pressured banks to make more subprime loans similar to those issued before the housing market collapse in 2008 and has encouraged the use of loans from the Federal Housing Administration.
“You really have to wonder what the administration is thinking on this one,” Vitter said. “We’re trying to work our way out of the housing collapse and a severe financial crisis, and the President is proposing a plan to do almost exactly what led to the collapse. This is some scary déjà vu. Part of his plan would expand the FHA’s lending ability – the problem is they’re broke, and in need of serious reform.”
Last Congress, Vitter introduced an FHA Reform Bill that requires the agency’s commissioner and the Housing and Urban Development Secretary to recapitalize the monthly mortgage insurance fund to the required two percent capital reserve ratio within two years, assesses penalties if the MMI fund does not maintain the congressionally mandated ratio and prohibits under-the-table bailouts of the FHA by the U.S. Treasury, which does not need congressional authority to make a “credit transfer” to the FHA.