The Financial Services Housing and Insurance Subcommittee continued its examination of the troubled Federal Housing Administration (FHA) today with a hearing that focused on several of the agency's programs that operate outside its mission.
This was the subcommittee's third hearing this year examining FHA and the need to reform the agency.
"FHA runs its operations contrary to the most basic principles of insurance and is nearing insolvency, putting taxpayers at risk of another government bailout," said Subcommittee Chairman Randy Neugebauer (R-TX). "Members on both sides of the aisle strongly support FHA's core mission of providing access to credit for lower-income borrowers and first-time homebuyers. There still is a general consensus in favor of strengthening and improving FHA, without risking further taxpayer exposure."
Today's hearing examined the mortgage insurance programs the FHA operates for multifamily housing, health care facilities and reverse mortgages -- all of which are activities that reach far beyond the agency's original mission. The FHA's original mission is to provide mortgage financing opportunities for low-income and first-time homebuyers.
Given that the FHA was designated a "high risk" agency by the Government Accountability Office earlier this year, many wonder whether the FHA can viably carry out its original mission, much less these other programs that are not related to its mission.
In addition to insuring single-family mortgages, the FHA also insures other kinds of mortgages--such as those for multifamily rental housing and health care facilities--through a separate insurance fund called the General Insurance and Special Risk Insurance Fund. While this fund is not projected to incur losses in the near term, many are concerned about the role the FHA plays in the multifamily market and that its policies subject taxpayers to undue risk.
Due to a lack of transparency in the GI/SRI Fund, Congress cannot fully assess the fiscal state of the FHA's multifamily insurance program.
The FHA also operates an insurance fund for reverse mortgages that enables those aged 62 or older to obtain additional income by borrowing against the equity in their homes. To make these mortgages possible, the reverse mortgage insurance provided by FHA protects lenders from losses due to non-payment.
In recent years, as home prices have fallen, many experts have become concerned about losses in the FHA's reverse mortgage portfolio. An independent actuarial review released last November estimated that the economic value of the FHA's reverse mortgage insurance program was negative $2.8 billion.