Hensarling: FHA Is ‘Impediment’ To Healthy Economy

Posted by Orb Staff on February 07, 2013 No Comments
Categories : Residential Mortgage

13254_220px-jeb_hensarling_official_portrait_112th_congress Hensarling: FHA Is 'Impediment' To Healthy Economy The first hearing of the House Financial Services Committee for the 113th Congress opened with a blistering salvo aimed at the Federal Housing Administration (FHA) by the committee's chairman, Rep. Jeb Hensarling, R-Texas.

In his opening statement, Hensarling noted that the U.S. economy was experiencing ‘sub-par’ economic growth, adding that the FHA was making a bad situation worse.

‘Hardworking Americans demand a healthy economy, and we cannot have a healthy economy until we have a housing finance system that is both sustainable and competitive,’ Hensarling said. ‘In its current form, the FHA is clearly an impediment to such a system.’

Hensarling criticized the FHA as deviating from its original mandate and opening itself to new risks.

‘It doesn't just focus on low- and moderate-income Americans,’ he said of the agency. "It provides mortgage insurance for expensive homes valued as high as $729,000. By offering riskier terms than private competitors, the FHA today controls 56 percent – well more than half – of the total mortgage insurance market in terms of numbers of loans. So instead of complementing a robust private mortgage market, the FHA's high cost loan limits and extremely low down payment requirements put it in direct competition with the private sector.’

Hensarling also repeated the data concerning the FHA's Mutual Mortgage Insurance Fund, which he defined as ‘flat broke.’ He also alluded to a lack of responsibility by the FHA to acknowledge its problems.

‘If the FHA were a private financial institution, likely somebody would be fired, somebody would be fined or the institution would find itself in receivership,’ Hensarling said. ‘Instead, it is merely, and merrily, on its way to becoming the recipient of the next great taxpayer bailout.’

Hensarling also took aim at the Obama administration by arguing it was allowing the FHA to create new problems for the still-fragile housing market.

‘Given their high loan-to-value, low credit score policies and high rates of default, it is an open question whether the FHA has now morphed into Countrywide,’ Hensarling said. ‘Arguably, the FHA has now become the nation's largest subprime lender – all with the blessing of the administration.

‘You do not help families achieve the American dream by putting them into homes they cannot afford,’ he added. ‘This is how you turn the American dream into a nightmare.’

Yesterday's hearing was the first in a series that Hensarling plans for the House Financial Services Committee; a second hearing is scheduled for Feb. 13. The FHA did not present testimony at yesterday's hearing, nor did it offer any public comment on Hensarling's remarks.

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