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Republican congressmen, such as Ed Royce Rep-California, are becoming more concerned about the Federal Housing Administration's financial plight and they want to increase FHA's down-payment requirement to 5%.

"There are increasing reports of the likely necessity of a taxpayer bailout for the FHA and this legislation aims to implement reforms to try to prevent such a bailout from occurring," Rep. Scott Garrett, R-N.J., said at a House Financial Services Committee hearing.

The Garrett bill also calls for a General Accountability Office study to determine the appropriate leverage ratio for FHA. In the early 1990s, Congress mandated that FHA maintain a minimum 2% capital ratio. A recent audit shows that the federal mortgage insurance fund has fallen below the 2% minimum. But FHA officials say the insurance fund should be able to maintain a positive capital position and FHA will not need taxpayer assistance.

Royce said FHA is operating at the same dangerous leverage ratios that led to the takeover of Fannie Mae and Freddie Mac. Garrett said he has drafted a bill that would increase the FHA down-payment requirement to 5% from the current 3.5% level.

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