The Federal Housing Administration is in deep trouble. According to its 2012 annual audit report, the FHA’s economic value or capital position is negative $13.5 billion. For the fourth consecutive year, the FHA has failed to meet its congressionally mandated minimum capital standard of 2 percent or $23 billion. One in six FHA loans are delinquent 30-days or more, and this number is growing. These new findings should be cause for significant concern to Congress and taxpayers. Monitor FHA’s position here through Ed Pinto’s FHA Watch series and learn what needs to be done to right the FHA’s listing ship.
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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.
In the housing shrivel inevitably following the great 21st century housing bubble, mortgage loans delinquent over 90 days shot up to their dizzying peak in the first quarter of 2010. More than four years have gone by since then; the housing and mortgage markets have recovered. But delinquencies are not back to normal yet.
What can we do to avoid a threatened restoration of the GSE ancien regime? Can the Fannie and Freddie situation be addressed before they arise from their near-death as dominating and pernicious as before? Yes, it can be.
Would it be possible to have a new housing bubble? Yes, of course. And now is definitely not the time for the Fed or politicians to promote further rapid house price inflation.
In the last decade, we have been through multiple international housing bubbles, shrivels, crises, bailouts, and recoveries. But with all the turmoil, and with several alleged new international housing bubbles in process, has anything basic in housing finance changed? No.
The narrative that came out of the financial crisis was that it could have been prevented by better regulation. That misreading of the facts is why we are again on our way to a mortgage financing system that will one day bring on another financial crisis.
The US financial crisis largely stemmed from a failure to understand the build-up of housing risk, combined with a housing finance market dominated by government players and distortionary policies.
Clearly memories as to the causes of the recent housing market collapse are short. Indeed, political pressures are once again increasing on the private sector to degrade sound lending practices.