Not Your Parents’ FHA: Neugebauer Statement at Financial Services Committee Hearing
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"This is Not Your Parents' FHA"
Statement as Prepared for Delivery at the Financial Services Full Committee Hearing
FHA: Examining its Proper Role in our Mortgage Insurance Market
Thank you, Mr. Chairman, for holding this important hearing examining the
As we meet today, FHA's financial condition continues to deteriorate. FHA's most recent actuarial report showed that it's
There's a pretty clear trend here: the government doesn't do a good job at pricing risk.
As if the impending bailout were not enough, I am becoming increasingly concerned as FHA strays far away from its intended mission. FHA was created in the 1930's with a unique mission to serve targeted populations such as first-time homebuyers, communities with little access to credit, and other higher-risk borrowers who were still creditworthy. I'm a homebuilder by trade, and I've been in this business for a long time. And I can tell you, FHA's mission has changed a great deal over that time. This isn't your parents' FHA. There are now loan limits loan limits now of upwards of
Since the onset of the financial crisis, the Agency has morphed from a mortgage insurer of last resort to a dominant component of our mortgage finance system. It has done this by expanding its insurance to higher income borrowers and houses in the upper end of the marketplace. For example, in my hometown of
As a result, FHA's insurance portfolio has exploded to
Finally, it is worth noting that FHA's insatiable desire to "grow out of the problem" has led to an aggressive push that could have devastating consequences for the very people FHA is intended to help. FHA's expanded role has been fueled by similar tactics employed by subprime lenders at the height of the housing boom. While appropriate for some, these practices - including seller concessions, small down payments, low credit scores, and cheap upfront pricing - can entice others who are unprepared for the obligations of homeownership to overextend themselves. The likelihood of enticing such borrowers is heightened as FHA becomes more aggressive in its push to ramp up its market share.
You know, there's a reason that the American dream includes owning a home. Home ownership provides a secure environment to raise a family, it creates a sense of community, and it gives us a feeling of pride. FHA was intended to help low-income families achieve that dream. Instead, I worry their policies are creating a destabilizing effect, and taxpayers are on the hook for their bad risk management practices.
I thank the Chairman for calling this hearing and I look forward to hearing from our witnesses today as we address these important issues.
TNS 23SQ 130208-4196528 StaffFurigay
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