House passes bill to strengthen FHA

By the Associated Press | September 11, 2012 | 3:34 PM EDT

WASHINGTON (AP) — The House has passed legislation to strengthen the financial position of the Federal Housing Administration, a key source of financing for low-income and first-time homebuyers.

The measure would set a minimum rate for the annual premiums paid for mortgage insurance, exclude unscrupulous lenders from the program and require those who commit fraud to repay the FHA.

The reserve fund of the FHA, which insures more than $1 trillion worth of mortgages, is near depletion.

The bill, sponsored by Republican Rep. Judy Biggert of Illinois, sets the minimum rate at 0.55 percent of the mortgage balance and gives the housing secretary discretion to raise that to 2.05 percent.

Last December Congress agreed to raise the FHA's mortgage insurance premium to pay for a temporary extension of the payroll tax cut.