U.S. Sen. David Vitter today offered the following statement after the Federal Housing Administration (FHA) released their annual report showing a $16.3 billion deficit. Vitter has warned against the FHA requesting billions of dollars in a federal bailout. It is projected that losses from defaults on the loans it insured from 2005 to 2009 will exceed the value of its insurance fund. The 2011 FHA report projected an economic value of $9.4 billion.
"The FHA has a responsibility to manage their funds responsibly and keep their books in order, but their economic value has completely deteriorated in the last year. This is an absolute failure of leadership by the current FHA management, and we must hold them accountable to taxpayers," Vitter said. "Giving billions of dollars to bailout the FHA would not fix what's broken in the housing market -- it only buries the nation further in debt. And an even bigger part of the problem is that Treasury can bail them out tomorrow and no one would know until next year. I want to see much more transparency at the FHA, starting with disclosure of all Treasury bailouts of the FHA and quarterly actuarial reports."
Since 2009, the FHA has been violating the congressionally mandated ratio of capital it must keep in its mortgage insurance fund. In December of 2011, Vitter introduced legislation to reform the FHA and ensure it can remain solvent without a federal bailout.
Here is a summary of the Vitter FHA Reform Bill:
* Requires that HUD Secretary, and FHA Commissioner, use all available methods under law to recapitalize the MMI fund to its statutorily required two percent capital reserve ratio within two years.
* Assesses penalties if the fund fails to maintain a ratio of two percent.
* Prohibits secret bailouts of the FHA by the Treasury Department. Treasury currently has authority to make a "credit transfer" to FHA and doesn't need Congressional authority to do so.