Federal Housing Administration
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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In another example of the Federal Housing Administration’s (FHA’s) mission failure, the redefault rate after 12 months on government-guaranteed modifications (government mods) hovers around 40 percent for loans modified in 2010, 2011, and 2012. This is yet another example of the nightmare at FHA—policies that promote a cycle of failure for working-class families.
As wards of the government, Fannie and Freddie became even more dominant in the mortgage market than they had been before. Almost everybody agrees that they should neither stay in government conservatorship nor return to their former GSE status. But how do we get off the tiger?
Bringing private capital back to fund mortgages and take on credit risk is an essential element of housing finance reform, particularly with respect to reform of the government-sponsored enterprises (GSEs) of Fannie Mae and Freddie Mac.
Congress should recognize that for the past 37 years the Federal Housing Administration has been the foreclosure leader, betraying its original mission of insuring sustainable loans to first-time and low-income borrowers.
President Obama is set to make a key staffing announcement today that will have major reverberations for the US housing market.
The hedge-fund lobby proposes to “privatize” Fannie and Freddie by converting the US Treasury’s 79.99% preferred stock interest to common stock and eventually float the sale of the common with an initial public offering. The lure is a big budget payoff.
A recent New York Times article entitled “Down Payment Rules Are at Heart of Mortgage Debate” reported that “lenders and consumer advocates are cautioning against down payment requirements.”
