Financial Services Committee Chairman Jeb Hensarling released the following statement today after the Government Accountability Office (GAO) added the Federal Housing Administration (FHA) to its list of government programs identified as "high risk due to their greater vulnerability to fraud, waste, abuse and mismanagement or the need for transformation".
"This reinforces everything our committee has been saying about the FHA for some time now -- it is a high risk to taxpayers, it is a high risk to the mortgage insurance market and it represents a high risk to our economy.
"We know the FHA is broke and is quickly approaching bailout-broke. So, while it is troubling, it is not surprising that GAO would add FHA to their high risk list.
"For Americans to have a healthy economy, we must put the nation on a sustainable fiscal path. And to have a sustainable fiscal path, we must also have a sustainable housing finance system. Today's announcement from GAO underlines my grave fears that FHA, as it is operating today, is an impediment to both," said Chairman Hensarling.
The Financial Services Committee has held two hearings just this month to review the financial condition and the role of the FHA. These two hearings are part of an ongoing series the committee will hold throughout the year that focus on FHA and the need to create a sustainable mortgage finance system.
An actuarial report released by the Department of Housing and Urban Development in November revealed the FHA's single-family insurance fund, which insures more than $1 trillion worth of home mortgages, has a negative economic value of $16.3 billion.
According to the GAO High-Risk Series report released today: "Although required to maintain capital reserves equal to at least 2 percent of its portfolio, FHA's capital reserves have fallen below this level, due partly to increase in projected defaults on the loans it has insured. As a result, we are modifying this high-risk area to include FHA and acknowledge the need for actions beyond those already taken to help restore FHA's financial soundness and define its future role."