FHA Will Face Ongoing Scrutiny to Deal with “Broke” Status in 2013

The Federal Housing Administration will face upcoming scrutiny from Congress due to its “broke” financial position, the House Financial Services Committee said today. The ongoing conversation on the FHA’s finances will take place through a series of hearings in the coming months, said Chairman Jeb Jensarling. 

Citing a 2012 audit of the administration’s insurance fund, Hensarling noted FHA’s negative economic value of $16.3 billion and its outsized role in the nation’s housing system. 

“The FHA is broke – bailout broke,” he said. “We need a sustainable mortgage finance system that gives hardworking Americans opportunities to buy homes they can actually afford to keep. Today, however, the FHA’s dire financial condition and dominance of our housing finance system are a clear and present danger to every taxpayer who is now at great risk of having to fund yet another Washington bailout. Without serious reform, FHA may become the next Fannie Mae and Freddie Mac.

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The committee will hold the first of the hearings February 6; to include a panel of housing finance experts and analysts. A following hearing February 13 will include testimony from FHA Commissioner Carol Galante on the actuarial review that revealed FHA’s financial position in 2012. 

Written by Elizabeth Ecker

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  • Congress and the OMB need to be focused on the MMI Fund. The audit report is awful. With the fixed rate HECM Standards not needing to be funded before 7/2/1013, we could see endorsements for this product through November 2013. Specifically that could mean an even worse situation for the HECM portion of the MMI Fund at the end of this fiscal year and perhaps to a small degree, even next.

    What the industry needs are substantially better home values. Unfortunately in a January 25, 2013, Robert Shiller of Case-Shiller writes: “Most experts are not predicting any big change in home prices. As of December, the Zillow-Pulsenomics Home Price Expectations Survey, which involves more than 100 forecasters, and the S.& P. Case/Shiller Composite Index Futures were both forecasting modest increases for the next half-decade, implying inflation-adjusted price growth of 1 to 2 percent a year.”

    While that kind of growth is much better than declines, it is not sufficient to stop the current bleeding in the HECM program. Let us hope that Congress will be patient and work with Commissioner Galante until things can turn around.

  • So we want to focus on the borrower who is financially capable and turn our back on those who have a dire need for the HECM, in the interest of shoring up the MMI fund. This runs counter to why we have the HECM in the first place…don’t loose sight of that. FHA offers a hand up to the young home buyer and our seniors. During this crisis we have bailed out much less worthy entities. This is a matter of core American values and if we as a country can’t afford that…

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