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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.
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
Edward J. Pinto, AEI
Sarah Rosen Wartell, Urban Institute
David Stevens, Mortgage Bankers Association and Former FHA Commissioner
John Weicher, Hudson Institute and Former FHA Commissioner
Peter J. Wallison, AEI
For more information, please contact Emily Rapp at [email protected], 202.419.5212.
For media inquiries, please contact [email protected], 202.862.5829.
Edward J. Pinto, an executive vice president and chief credit officer for Fannie Mae until the late 1980s, has done groundbreaking research on the role of government housing policies in the lead-up to the financial crisis. In particular, his data have revealed striking facts about the contributions of housing policy to the mortgage crisis. Two of his major research papers, "Government Housing Policies in the Lead-up to the Financial Crisis: A Forensic Study" and "Triggers of the Financial Crisis," were submitted to the Financial Crisis Inquiry Commission. At AEI, Pinto is continuing his work on the role of housing policies in the financial crisis and researching policy considerations and options for rebuilding America’s housing-finance sector.
David Stevens is president and CEO of the Mortgage Bankers Association (MBA). Before assuming this position, Stevens served as assistant secretary for housing and federal housing commissioner at the US Department of Housing and Urban Development (HUD). Stevens has more than 30 years of experience in mortgage finance, and has held several executive-level positions in sales, acquisition, investment, risk management, and regulatory oversight. He is well known throughout the industry and is often quoted in the media as a key housing influential, serving as an industry authority on major mortgage finance legislative and regulatory issues. He currently serves on the Hope Loan Port board of directors and on the board of MBA Opens Doors Foundation, MBA’s national 501(c) 3 nonprofit organization.
Peter J. Wallison is a co-director of AEI's program on financial policy studies and researches banking, insurance, and securities regulation. As general counsel of the US Treasury Department, he had a significant role in the development of the Reagan administration's proposals for the deregulation of the financial services industry. He also served as White House counsel to President Reagan and is the author of “Ronald Reagan: The Power of Conviction and the Success of His Presidency” (Westview Press, 2002). His other books include “Competitive Equity: A Better Way to Organize Mutual Funds” (AEI Press, 2007), “Privatizing Fannie Mae, Freddie Mac, and the Federal Home Loan Banks” (AEI Press, 2004), “The GAAP Gap: Corporate Disclosure in the Internet Age” (AEI Press, 2000), and “Optional Federal Chartering and Regulation of Insurance Companies”(AEI Press, 2000). He also writes for AEI's Financial Services Outlook series.
Sarah Rosen Wartell became the third president of the Urban Institute in February 2012. A public policy executive and housing markets expert, Wartell was President Bill Clinton's deputy assistant for economic policy and the deputy director of his National Economic Council. In 2003, she cofounded the Center for American Progress, serving as its first chief operating officer and general counsel. Later, as executive vice president, she oversaw its policy teams and fellows. Her work has focused on the economy and housing finance, mortgage markets, and consumer protection. In 2012, she was named a “Woman of Influence” by HousingWire magazine.
John Weicher is director of the Center for Housing and Financial Markets at the Hudson Institute. From 2001 to 2005, he served as assistant secretary for housing and Federal Housing Administration (FHA) commissioner at the US Department of Housing and Urban Development (HUD). He previously served as assistant secretary for policy development and research at HUD from 1989 to 1993, during which time he was primarily responsible for developing the 1990 FHA reform legislation that reestablished FHA on a sound financial basis. Earlier, he served as chief economist at both HUD and the Office of Management and Budget. During 2007–08, Weicher chaired the Committee to Evaluate the Research Plan of HUD at the National Research Council. He has also been a member of the Millennium Housing Commission, the Census Advisory Committee on Population Statistics, and the Committee on Urban Policy of the National Research Council. Weicher was the president of the American Real Estate and Urban Economics Association in 1982, and received its George Bloom Award for Career Achievement in 1993. From 1983 to 1987, he was the F.K. Weyerhaeuser Scholar in Public Policy at the AEI. Weicher is the author or editor of 13 books and the author of numerous popular and scholarly articles on housing and urban economics, housing finance, and the distribution of income and wealth. He has testified before congressional committees on more than 40 occasions.
Audio part 2: Selling hope, delivering harm: How the FHA sets up working-class families for failure
Edward Pinto - FHA Presentation
John Weicher - FHA presentation
David Stevens - FHA Presentation