U.S. Sen. David Vitter today responded to reports that President Obama's budget allocates an estimate $943 million dollars to bail out the Federal Housing Administration (FHA). Since 2011, Vitter has been warning of the FHA needing a bailout and has previously introduced legislation to prevent it.
"The FHA has a responsibility to manage their funds responsibly and keep their books in order, but instead this administration fails to take enough steps to protect the taxpayer. Now, President Obama admits he must give them a $943 million bailout as part of his budget proposal -- however the total amount of this bailout could escalate. We've seen thing coming for a while, and giving millions of dollars to bailout the FHA, burying us further in debt, was absolutely preventable," Vitter said. "This is an absolute failure of leadership by the current FHA management, so Congress must take steps to return FHA to its original mission of helping low-to-moderate income families and first-time homebuyers and to improve the FHA's solvency immediately."
The most recent independent actuarial report shows that the FHA single family capital ratio has gone negative for the first time since 1991 and the economic value is negative $13.5 billion. The delinquency rate for all FHA loans continues to rise, currently standing at 9.6%. The delinquency rates for loans originated in 2006, 2007 and 2008 are between 20 -- 30%. Approximately 739,000 loans are seriously delinquent, an increase of more than 100,000 loans from last year.
Since 2009, the FHA has been violating the congressionally mandated ratio of capital it must keep in its mortgage insurance fund. Last Congress, Vitter introduced legislation to reform the FHA and ensure it can remain solvent without a federal bailout; he also proposed this legislation as an amendment to the fiscal cliff legislation at the end of 2012. Vitter is likely to reintroduce similar legislation this Congress.
Here is a summary of the Vitter previous 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.