This vote was on an amendment by David Vitter, R-La., that would have stipulated that the Federal Housing Administration’s primary responsibility is to maintain its own solvency, and require it to temporarily suspend any program that threatens its solvency.  The amendment was offered to a bill that would ease application and eligibility requirements for a $300 billion foreclosure prevention program enacted to help blunt the impact of the economic downturn.

Vitter said his amendment “focuses like a laser beam on the importance of preserving and protecting the fundamental solvency of the FHA.

“This amendment requires that the first duty of the FHA is to maintain that solvency. It says if the provisions of this underlying bill, or any other existing requirement, cause the FHA to be reasonably likely to need a bailout from Congress—which a lot of folks think is imminent—then the Commissioner shall temporarily suspend that program which is causing a need for a bailout and recommend legislation to Congress to fix the situation,” Vitter said.  “Rather than rush there and heap more burdens and more requirements and more need for more money on the FHA, which this underlying bill does, perhaps we should put in place some basic protections to the solvency of the FHA.”

Chris Dodd, D-Conn., said solvency is important, but that the FHA has been exceedingly prudent, never engaged in the sort of exotic financial instruments that private banks did that have been widely credited as causing the housing meltdown, and that there are already protections in place to ensure that the FHA remains functional.

“Today, when very little credit is available for home mortgages, FHA is proving to be vitally important. Thirty percent of the mortgage market today is made up of FHA,” Dodd said.  “I am just concerned if in the … case of FHA if solvency is the only value, then we lose the value of FHA at a time when housing is having a hard time finding available credit.”

By a vote of 36-56, the amendment was rejected.  All but one Republican present voted for the amendment.  Every Democrat present voted against the amendment.  The end result is that the measure went forward without language that would have required the FHA to temporarily suspend any program determined to threaten FHA’s solvency.