Congressman Robert Hurt released the following statement after participating in the Financial Services Committee Hearing examining the proper role of the Federal Housing Administration in housing finance:
"The Federal Housing Administration is a perfect example of how Washington over-promises and spends too much. As our economy is burdened by a staggering $16 trillion dollar debt, we have recently learned that FHA is on the verge of requiring a taxpayer-funded bailout for the first time in its history. Between Fannie Mae, Freddie Mac, FHA, and other federal programs taxpayers now back over 90% of new residential mortgages. This exposes each and every taxpayer in Virginia's 5th District to the risk of having to fund yet one more Washington, D.C. bailout. Today's hearing was the first of many steps the Financial Services Committee will take to protect Americans' hard-earned tax dollars and transition government-backed mortgage financing to the private market. On behalf of 5th District Virginians, I remain committed to putting an end to Washington bailouts and I was glad that today's hearing focused on ways we can reduce the size and scope of the federal government and protect taxpayer dollars."
The National Housing Act of 1934 established the FHA, and its mission was to provide federal mortgage insurance in order to broaden homeownership, protect lending institutions, and stimulate the building industry. However, in recent years the FHA has outgrown itself, currently operating with a negative $16.3 billion economic value, which has resulted from further declines in national home prices, more loans having elevated default potential, and uncertain economic conditions. While this does not necessarily indicate that FHA plans to draw from the Treasury, Congress and the public will have a better sense of whether the FHA will draw funds from the Treasury when the Obama Administration releases its FY 2013 budget proposal in February 2013: if the FHA expects to draw funds from the Treasury, the President's budget will contain an estimate of the amount that it expects to borrow to cover shortfalls.