Selling hope, delivering harm: How the FHA sets up working-class families for failure

Video

Event Summary

Agreeing on an acceptable failure rate for the Federal Housing Administration (FHA) is a relevant and important policy issue currently facing America. At an AEI event on Friday, AEI's own Edward Pinto highlighted the deleterious impacts that a national projected foreclosure rate of 10 percent — the FHA's weighted average rate over the last 37 years — can have on working-class families and neighborhoods. Pinto emphasized that the FHA should return to its traditional mission of helping low- and moderate-income families by reforming its loan structure.

The Hudson Institute's John Weicher, a former FHA commissioner, explained the historical tradeoff between reaching the target cohort of FHA's mission and preventing high levels of lending risk as a conflicting issue of FHA loan reform. Sarah Rosen Wartell of the Urban Institute then stressed that picking a hard and fast rule for an acceptable rate of failure could lead to market distortion, detracting from the FHA's function by not taking into account future macroeconomic variables. The Mortgage Bankers Association's David Stevens, also a former FHA commissioner, concluded that moving forward, incorporation of credit quality is necessary for developing sustainable products for homebuyers. 
--Emily Rapp

Event Description

At this event, AEI’s Edward Pinto will discuss his groundbreaking analysis of 2.4 million loans insured by the Federal Housing Administration (FHA) in 2009–10 that have set working-class families up for financial failure. Among Pinto’s findings was the fact that over 9,000 zip codes have a projected foreclosure rate of 10 percent or more on FHA-backed loans. Currently, one in seven working-class families in these neighborhoods stands to lose its home, savings, and credit score to foreclosures fueled by FHA’s reckless lending policies. Pinto and discussants will address a particularly relevant public policy question: what is the acceptable level of foreclosure for loans under the FHA program? 

If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours.

Nightmare at FHA: Selling hope, delivering harm | A new website from Edward J. Pinto and AEI

How the FHA hurts working-class families and communities | Edward J. Pinto | White Paper | December 2012

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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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