FHA Watch, April 2013 (Vol. 2, No. 4)

Article Highlights

  • FHA’s estimated GAAP net worth equals –$30.63 billion, with a capital shortfall of $51–71 billion.

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  • FHA's accounting practices wouldn't fly with any other regulator.

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Read Volume 2, Number 3, March 2013.
Explore the Nightmare at FHA project.

This Issue’s Highlight

Government Accounting Principles: Neither Accounting nor Principles

Much misinformation exists regarding the rigor of the Federal Housing Administration’s (FHA’s) capital adequacy standards compared to the private sector. Recently, this statement was made at a House Committee on Financial Services’ Insurance Subcommittee hearing:

The requirement of FHA to hold 30 years’ worth of expected claims is 30 times more than that required of banks, which are only required by the Financial Accounting Standards Board to hold one year of reserves.

Any private financial institution that proposed to calculate its capital in the same manner as the FHA would be stripped of its charter before being escorted out of the room by its prudential regulator.

This Month’s Features

Spotlight on Insolvency
FHA’s Estimated GAAP Net Worth Equals –$30.63 Billion, with a Capital Shortfall of $51–71 Billion

Spotlight on Delinquency
Overall Rate Declines to 15.21 Percent

Spotlight on Best Price Execution
FHA, VA, and USDA’s Pricing Dominance Increase

Spotlight on Government Accounting Principles: Neither Accounting nor Principles
Comparing the FHA’s Safety and Soundness Regulatory Regime to the Private Sector’s

End the Nightmare at FHA
Fundamental and Comprehensive Reform of the FHA Is Urgently Needed

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Edward J.
Pinto

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