Frank Questions Bush Plan To Overhaul FHA.

Financial Services ranking member Barney Frank, D-Mass., today expressed concern over a Bush administration proposal to overhaul the Federal Housing Administration, arguing that surplus revenues brought in by any new changes should be used to help finance home mortgages for lower-income families. Frank said provisions in the Bush plan, such as increasing loan limits and allowing zero down payments, would bring in a surplus of $845 million in FY07. Frank said at a Financial Services Housing Subcommittee hearing some of that surplus should be used to help subprime borrowers who represent much of FHA's clientele. The program provides mortgage insurance for loans made by private lenders, often to low-income, minority and first-time homebuyers. Frank was especially critical of the Bush plan to allow HUD to set a sliding scale, based on creditworthiness, for upfront fees and annual premiums. Frank said the change would hurt the riskiest borrowers whose only option now is the high rates of the subprime lending market. Assistant HUD Secretary Brian Montgomery said his agency decided to implement the sliding scale for FHA fees and premiums because it was commensurate with the risk of attracting borrowers with poor credit ratings.