House Committee: $1.7 Billion FHA Bailout is Unacceptable

Following confirmation Friday that the Federal Housing Administration (FHA) will require a $1.7 billion infusion from the U.S. Treasury, the House Financial Services Committee expressed its disappointment that the federal entity would need a taxpayer bailout. 

With the announcement arriving near the five-year anniversary of the Wall Street bailouts, Committee Chairman Jeb Hensarling (R-TX) pointed much of his dissatisfaction toward the Obama Administration.

“As Americans approach the five-year anniversary of the Wall Street bailouts that were forced on hardworking taxpayers, the Obama administration’s mismanagement of the economy took a new but predictable turn today with the confirmation that taxpayers will now have to bailout yet another failed Washington housing program, the FHA,” Hensarling said in a statement Friday.

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The $1.7 billion figure is nearly twice as much as the agency estimated in April when it projected a shortfall of $943 million. 

In light of the FHA bailout announcement, the Committee stressed the need for housing finance reform, specifically advocating for reforms found in the Protecting American Taxpayers and Homeowners (PATH) Act.

The PATH Act calls for phasing out government-sponsored enterprises Fannie Mae and Freddie Mac, while also increasing competition by ending the federal government’s role in the housing finance market. 

“The FHA is clearly headed toward financial disaster and taking taxpayers along for the ride,” said Hensarling. “Unless Congress enacts sustainable housing finance reform, it’s possible taxpayers will be forced to write blank bailout checks to the FHA indefinitely. That is unacceptable, and it is further evidence Congress needs to pass sustainable housing finance reforms found in the PATH Act.”

Written by Jason Oliva

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  • PATH as it currently stands is not a bill this industry needs enacted. Section 292 of that bill (H.R. 2767) in part states the following:

    “SEC. 292. REPEAL OF CERTAIN FHA PROGRAMS.

    (a) Repeals- Effective upon the expiration of the 2-year period that begins upon the date of the enactment of this Act, the following sections are repealed:

    (1) HOME EQUITY CONVERSION MORTGAGE PROGRAM- Section 255 of the National Housing Act (12 U.S.C. 1715z-20).”

    Yes, House Republicans are proposing to eliminate the whole HECM program. Once the budget and debt ceiling legislation controversy are dealt with, there is a huge probability that this legislation will be voted on by the entire House before the end of this calendar year. The bill has already been reported out of Committee with a recommendation for a vote.

    HECM losses even though estimated have been recognized on the financial statements reporting HECM financial activities for those HECMs endorsed after 9/30/2008 (i.e., all HECMs accounted for in the MMI Fund). Then there are the over $2.2 billion transfers brought into the HECM portion that fund during fiscal years 2010 and 2011.

    What HUD did not explain is why they requested $1.7 billion. Is it because HECM MMI Fund losses were $0.8 billion larger than expected for this fiscal year? Is it that the increased amount is needed for funds other than the MMI Fund? Is it that the GI Fund needs those increased funds, the fund in which all other HECMs are accounted?

  • Funny that the Obama administration created the CFPB to protect the consumers from the big bad banks. What is in place to protect us from the government constantly digging into our pockets?

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