House Financial Services Committee Chairman Jeb Hensarling said during a hearing last week that witnesses who warned about the potential insolvency of the FHA at a hearing earlier in the year have “been proven correct.”
“On Feb. 13, when our witness, [Federal Housing Administration] Commissioner [Carol] Galante came before us to discuss the state of FHA’s single-family insurance fund, she testified that FHA was making changes to ‘accelerate’ the fund’s recovery,” Hensarling said. “Regrettably, seemingly, FHA has only ‘accelerated’ our national bankruptcy by accelerating the national debt clock which can be seen on the monitors to both my left and my right.”
The Congressional Budget Office said last month that single-family mortgages insured by the FHA moved from a net savings situation to one costing taxpayers as borrower defaults exceed forecasted expectations. The mortgages have cost the FHA an estimated $15 billion, though the initial cost estimate suggested $45 billion in savings, Housing Wire reports.
The FHA, however, has disputed the findings, saying they do not account for 2013 fiscal year funds. The agency has also maintained that it collected premiums that are already working to offset losses, including losses on loans made during the 2008 financial crisis, according to Reverse Mortgage Daily.
Hensarling said the “taxpayer-funded bailout” of the FHA reinforces the claims witnesses have made about the agency in the past: “that it is a high risk to taxpayers, it is a high risk to the mortgage insurance market and it is a high risk to our economy.”
Hensarling touted the Path Act, which is designed to shift the risk from taxpayers and into the private sector by reducing the FHA’s role in the housing finance market.
“The American people clearly want to end the destructive cycle of boom, bust and bailout that Washington policies have helped fostered,” Hensarling said. “They do not want an economy laid low by unsustainable levels of debt. Regrettably The FHA, as it operates today, exacerbates both. The FHA has gone from backstopping the market to supplanting the market.”