Energy Policy Modernization Act Amendment Weakens FHA Underwriting Standards
Last month, the Senate passed the Energy Policy Modernization Act of 2015 (S. 2012) by a vote of 85-12. While there were many reasons to oppose the bill, the Bennet-Isakson FHA amendment that was added to the bill, by a vote of 66-31, should especially concern real estate professionals.
The amendment, offered by Senator Johnny Isakson (R-GA), requires the Federal Housing Administration (FHA) to include potential savings on energy efficiency programs in their mortgage underwriting process. This bill will effectively weaken the FHA’s loan standards by increasing the amount of money potential homeowners will be able to borrow for savings that may never come.
Senator Richard Shelby (R-AL), who opposed the amendment, wisely stated: “The mortgage underwriting process, as we all know here, is about evaluating a borrower’s ability to afford a mortgage, and history tells us that if we play around with it, it does not end well…this amendment would weaken FHA’s underwriting standards, leading to greater safety and perhaps soundness concerns for the FHA portfolio, which received a $1.7 billion bailout in 2013.”
Using taxpayer dollars to provide mortgage loans to individuals who can’t afford them threatens the long term stability and health of the housing market. The House of Representatives should block this bill from passage.