There’s been a lot of chatter recently about whether or not the Federal Housing Administration (FHA) is going to need a bailout. The FHA insures—but does not write—home loans, and thanks to the housing bust, the agency has had to dip a little further into its reserves than it probably would have liked to. That means the FHA might fall below its mandated 2% capital reserve ratio. We were supposed to get the agency’s annual actuarial study today, but last night the FHA said the report would be delayed. As HousingWire reports, FHA asked its inspector general to run some additional risk scenarios. The inspector general did—and based on those results the FHA called into question the accuracy of the report. All of which might make you think the bailout talk will have to wait for another day. Wrong!
You’ve failed to take Congress into consideration. Even without the report in hand, certain members are jumping up and down, nonplussed at the thought of funneling even more money into yet another housing agency. As Reuters reports:
A pair of House Republicans on Wednesday warned the Obama administration that Congress does not have the appetite for a bailout of the financially strapped Federal Housing Administration.
“If not addressed promptly, problems at the FHA may result in yet another massive taxpayer-funded bailout that this country cannot afford and which the American people will not accept,” wrote Republicans Darrell Issa of California and Spencer Bachus of Alabama in a letter, released Wednesday, to Housing and Urban Development Secretary Shaun Donovan.
That’s a major slam on the FHA, considering that the agency was a key player in keeping the mortgage market going in the dark days of 2008. As skittish private lenders pulled back on credit, the FHA helped get a lot of deals done. According to SNL Financial, 3% of home loans written by Wells Fargo in 2007 were backed by the FHA. In 2008, more than 12% were. Bank of America saw a similar jump—from 2% in 2007 to 12% in 2008. J.P Morgan Chase went from less than 1% to nearly 10%. What would the housing market have looked like without the FHA? I’m glad we didn’t have to find out.
Now, no one is saying the FHA did all that as gracefully as we would have liked. But it wasn’t exactly a secret what was happening. In fact, in order to expand the reach of the FHA, in 2008 Congress—Congress!—raised the size of loan the FHA is allowed to insure. And just last month, Congress—Congress!!—extended that raised limit into 2010. It’s fine to complain about how the FHA has run things, but when that complaining comes from the same body that leaned on the FHA to help save the housing market and yet didn’t, say, double its budget to hire more people to handle the massive inflow, I start to get a little testy.
But enough of that. I’m not going to be too judgy until I get my FHA annual actuarial study. Data first.