Congressman Robert Hurt released the following statement after Carol Galante, Commissioner of the Federal Housing Administration, appeared before the full Financial Services Committee as the Committee examined the financial status of FHA:
"Conducting oversight of federal agencies is a very important part of our job at the Financial Services Committee and I appreciate Commissioner Galante sharing her insight today as we continue to examine ways in which we can stop taxpayer-funded bailouts. Much like the rest of the federal government, FHA has, year after year, continued to expand even as it became clear that it could not afford to do so. On the verge of requiring a bailout for the first time in its history, the House Committee on Financial Services has made it clear that we are willing to work with FHA on necessary financial reforms. However, with taxpayers in Virginia's 5th District and across the country at risk, the Committee remains committed to putting an end to Washington bailouts. I appreciate the Commissioner's testimony today and I look forward to working with members of the Committee to reduce the size and scope of FHA so it can get back to living within its means, just like families and small businesses across the 5th District do."
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, with its Mutual Mortgage Insurance Fund 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 2014 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.