Jeb Hensarling (R-Texas), the chairman of the House Financial Services Committee, said on Wednesday that the Obama administration has “put taxpayers at risk” for a bailout of the Federal Housing Administration.
According to President Obama’s 2014 budget released on Wednesday, the FHA will need $943 million in funding from the U.S. Treasury to cover losses resulting from the housing crisis in 2007, Politico reports.
“We now know for certain that the FHA is not just broke, the FHA is bailout broke,” Hensarling said. “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. Instead, the FHA is merrily on its way to becoming the recipient of the next great taxpayer bailout. It’s outrageous.”
The FHA has until September to cover the funding gap through increased revenue from new loans or settlements with big banks, or taxpayers would likely be on the hook, according to Politico.
“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, FHA is clearly an impediment to such a system. Because of this, the Financial Services Committee has been working to examine needed reforms to FHA, reforms that go beyond its fiscal solvency and address structural flaws of FHA.”
Randy Neugebauer (R-Texas), the chairman of the House Subcommittee on Housing and Insurance, proposed four potential FHA reforms in a Wednesday hearing. The proposed reforms include the stabilization of the FHA, a clear definition of the FHA’s mission, the shift of risk from taxpayers to the private sector and the implementation of risk management principles and procedures in the FHA’s operation of its Mutual Mortgage Insurance Fund, which insures the agency’s single-family mortgages.
Additionally, Democrats have pressured Congress to enact proposals that the FHA has said will provide some budget relief. In March, Reps. Maxine Waters (D-Calif.) and Michael Capuano (D-Mass.) reintroduced legislation that would grant many of the requests, including new methods to transfer servicing to smaller firms that are better-suited to assist struggling homeowners, Politico reports.