How to fix the Federal Housing Administration

For sale by Marcio Jose Bastos Silva / Shutterstock.com

Article Highlights

  • Congress should require a safety and soundness review of FHA now.

    Tweet This

  • The FHA must bring a credible plan to Congress on how to deal with its insolvency.

    Tweet This

  • The longer it takes the FHA to return to a sound fiscal footing, the greater the risk to the taxpayer.

    Tweet This

 

Today, FHA released its FY 2012 Actuarial Study for its main single-family insurance program confirming its economic value or capital position has turned negative by $13.5 billion. This represents a deterioration of $23 billion from last year’s projection for FY 2012. The projection for FY 2018 has a total of $79 billion in plus and minus adjustments netting out to a negative $17 billion compared to last year’s projection. Swings of this amount indicate that the model FHA uses to calculate its actuarial soundness, while improved over earlier versions, continues to provide projections that are highly uncertain.

Each year, the FHA gives Congress a negative report and then says not to worry, next year will be better. But in fact, each year it gets worse. FHA’s delinquencies continue to grow with one in six FHA loans delinquent 30-days or more. The longer it takes the FHA to return to a sound fiscal footing the greater the risk to the taxpayer.

The rules FHA uses would not pass muster for a private company. My analysis indicates that, today, under generally accepted accounting principles (GAAP), the FHA has a net worth of negative $25 billion.

Read the full article on the AEIdeas blog

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Edward J.
Pinto

What's new on AEI

Defeating ISIS: AEI experts weigh-in before the president’s address on Wednesday
image Degrading, defeating, and destroying the Islamic State
image Wealth Building Home Loan: Building wealth through homeownership and retirement savings
image The $3 iPhone
AEI on Facebook
Events Calendar
  • 15
    MON
  • 16
    TUE
  • 17
    WED
  • 18
    THU
  • 19
    FRI
Tuesday, September 16, 2014 | 5:00 p.m. – 6:00 p.m.
The Constitution as political theory

Please join us for the third-annual Walter Berns Constitution Day Lecture as James Ceasar, Harry F. Byrd Professor of Politics at the University of Virginia, explores some of the Constitution’s most significant contributions to political theory, focusing on themes that have been largely unexamined in current scholarship.

Wednesday, September 17, 2014 | 8:10 a.m. – Thursday, September 18, 2014 | 1:30 p.m.
Third international conference on housing risk: New risk measures and their applications

We invite you to join us for this year’s international conference on housing risk — cosponsored by the Collateral Risk Network and AEI International Center on Housing Risk — which will focus on new mortgage and collateral risk measures and their applications.

Event Registration is Closed
Thursday, September 18, 2014 | 2:15 p.m. – 3:00 p.m.
Speaker of the House John Boehner on resetting America’s economic foundation

Please join us as Speaker John Boehner (R-OH) delivers his five-point policy vision to reset America’s economy.

Event Registration is Closed
Friday, September 19, 2014 | 9:15 a.m. – 11:00 a.m.
Reforming Medicare: What does the public think?

Please join us as a panel of distinguished experts explore the implications of the report and the consumer role in shaping the future of Medicare.

Event Registration is Closed
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.