This week will be a busy one for lawmakers on Capitol Hill, who plan two hearings that could shape the federal government’s response to rising delinquencies and foreclosures among subprime mortgage borrowers.

At a hearing Tuesday, the House Committee on Financial Services will consider recommendations in a recent report by the Congressional Joint Economic Committee, including increased support for local foreclosure programs and strengthening Federal Housing Authority mortgage insurance programs.

The report also recommended instituting a federal anti-predatory-lending law, tougher loan disclosure requirements and suitability standards requiring borrowers to demonstrate their ability to repay mortgage loans.

Lending industry groups including the Mortgage Bankers Association say they support stronger foreclosure prevention and FHA insurance programs, but oppose some of the proposed restrictions on lenders such as suitability standards.

The House Finance Committee will also hold a hearing Thursday on proposals to modernize the FHA.

A bill sponsored by Democrats Barney Frank and Maxine Waters, HR 1852, would increase FHA loan limits in high-cost areas such as California, New York and Massachusetts; authorize no- or low-down-payment FHA-backed loans to compete with private sector loans; permit FHA to underwrite loans to borrowers with higher credit risk than currently allowed; and eliminate a volume cap on FHA reverse mortgage loans.

The latest version of the bill scales back a proposal to raise fees in a bill approved by the House last year. Borrowers making down payments would pay a maximum upfront fee of 2.25 percent, instead of 3 percent, and the maximum annual fees would be .55 percent instead of 2 percent.

The reduced fees would cut closing costs on a $300,000 by $2,250, and reduce annual fees by $20,000 over five years.

The bill would give the Department of Housing and Urban Development the authority to require counseling for riskier borrowers, and require disclosures spelling out the costs and risks of zero-down and lower-down-payment loans.


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