Rolling the housing dice, again!

Article Highlights

  • With delinquencies increasing, the alarm bells are ringing for the FHA

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  • The most pressing issue is the safety and soundness of the FHA and the risk it poses to taxpayers

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  • A dozen facts about the FHA's increasing instability

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In a paper entitled "Too Early to Sound the FHA Alarm," the Center for American Progress (CAP) comes to the defense of the Federal Housing Administration (FHA), the troubled federal housing entity. In doing so, CAP sounds eerily similar to Representative Barney Frank's position regarding Fannie Mae and Freddie Mac in 2003: "I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation towards subsidized housing."

Recall that as late as July 2008, a mere two months before being placed in conservatorship, Fannie and Freddie's regulator found them to be "adequately capitalized, holding capital well in excess of the OFHEO-directed requirement, which exceeds statutory minimums." It was only after the Treasury Department and FHFA (successor agency to the Office of Federal Housing Enterprise Oversight) retained Morgan Stanley to probe the companies' finances that the companies were found to be woefully under-capitalized.

Read the full article on American.com

Edward Pinto is a resident fellow at AEI

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About the Author

 

Edward J.
Pinto
  • American Enterprise Institute (AEI) resident fellow Edward J. Pinto is the codirector of AEI’s International Center on Housing Risk. He is currently researching policy options for rebuilding the US housing finance sector and specializes in the effect of government housing policies on mortgages, foreclosures, and on the availability of affordable housing for working-class families. Pinto writes AEI’s monthly Housing Risk Watch, which has replaced AEI’s FHA Watch. Along with AEI resident scholar Stephen Oliner, Pinto is the creator and developer of the AEI Pinto-Oliner Mortgage Risk, Collateral Risk, and Capital Adequacy Indexes.


    An executive vice president and chief credit officer for Fannie Mae until the late 1980s, Pinto has done groundbreaking research on the role of federal housing policy in the 2008 mortgage and financial crisis. Pinto’s work on the Government Mortgage Complex includes seminal research papers submitted to the Financial Crisis Inquiry Commission: “Government Housing Policies in the Lead-up to the Financial Crisis” and “Triggers of the Financial Crisis.” In December 2012, he completed a study of 2.4 million Federal Housing Administration (FHA)–insured loans and found that FHA policies have resulted in a high proportion of working-class families losing their homes.

    Pinto has a J.D. from Indiana University Maurer School of Law and a B.A. from the University of Illinois at Urbana-Champaign.

  • Phone: 240-423-2848
    Email: edward.pinto@aei.org
  • Assistant Info

    Name: Emily Rapp
    Phone: 202-419-5212
    Email: emily.rapp@aei.org

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