A report by an independent actuary was released today that showed the Federal Housing Administration (FHA), an agency under the Department of Housing and Urban Development (HUD) that guarantees housing loans, is on the verge of needing a rather substantial taxpayer funded bailout. The report projects the FHA has $30.4 billion in reserves, but is expected to lose $46.7 billion on the loans it has guaranteed -- meaning they are facing a $16.3 billion deficit. This deficit has been caused by the more than 17 percent of all FHA-backed loans that are delinquent as of September.
"For those of us who have been following the FHA, the announcement today that they are going to need a bailout isn't a surprise," stated Westmoreland. "In fact, a bailout was almost needed earlier this year until the FHA received a legal settlement that helped prop them up for a little longer. Of course, the administration and officials at FHA and HUD have stalled so long on this issue, we are now at the stage where not much can be done to shield the American people from it. At the end of the day, their hard-earned taxpayer money is going to be used to pay for these failed mortgages. Not only because we have reached the critical point where a bailout will absolutely be needed, but also because the Treasury Department can give the money to FHA without congressional approval. What we can do is figure out why this happened and what we need to do to stop bailouts like this from happening in the future."
Together with Fannie Mae and Freddie Mac, both of whom are under conservatorship of the US government, federal agencies back nearly 9 out of 10 new mortgages. On top of that, the FHA will back mortgages for people who put as little as 3.5% down when they purchase a home -- making them a risky lender who would most likely not get a loan without the guarantee of the FHA.
"What we've got here are federal bureaucrats at FHA and HUD trying to turn the federal government into a bank for risky lenders using the American taxpayers' money," stated Westmoreland. "And they are doing it at a record high failure rate. As of the end of September, overall the FHA insured more than 700,000 loans that were 90 days or more past due or in foreclosure. Like I told some HUD officials at a committee hearing earlier this year, if the FHA was a community bank in Georgia, they would have been put down a long time ago. Unfortunately, it looks like the Obama Administration is going to bailout yet another failed government agency."
Whether the Treasury officially gives FHA the funding won't be made public until the president submits his budget for FY2014 sometime next February. The exact amount of the bailout won't be made known until sometime next Fall. Congressman Westmoreland has been following this issue closely and has discussed the impending FHA bailout on several occasions.