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Finding Common Sense Solutions to Reform FHA and Ensure Stable Housing Markets


Location: Washington, DC

Congressman Randy Neugebauer (R-TX) released the following statement as prepared for delivery at the Financial Services Housing and Insurance Subcommittee hearing entitled, Mortgage Insurance: Comparing Private Sector and Government-Subsidized Approaches:

"Thank you all for attending this important hearing examining the Federal Housing Administration's (FHA) role in housing finance and potential ideas to reform the Agency. This is the fourth in a series of hearings on FHA and we intend for this hearing to inform the drafting process for a potential FHA reform bill.

"Too often when a problem arises, people in Washington hurry to fix it with legislation or regulations. When that process is rushed, we run the risk of not only settling for a less-than-ideal solution, but also of inadvertently creating other problems.

"That's why this process has been very deliberate.

"In our previous hearings, we identified the problems plaguing FHA. We learned that FHA is nearing insolvency and putting taxpayers at risk of another government bailout. We learned that FHA is operating far outside its historical mission, which is hindering the development of a sustainable housing finance market. Finally, we learned that despite being an insurance company, FHA runs its MMI fund contrary to the most basic principles of insurance.

"Our past hearings also helped us clarify our shared goals for moving forward. 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. And there still is a general consensus in favor of strengthening and improving FHA.

"Now that we've examined the problem and identified our goals, it's time to brainstorm solutions. That's why we're here today.

"Given the fiscal and administrative challenges facing FHA, the hearing today is invaluable in assisting the Members in developing a proposal that will improve FHA, protect taxpayers, and facilitate the return of private capital in the mortgage insurance market.

"Once this hearing concludes, Committee staff will begin working on a legislative framework to reform FHA. I also envision holding additional subcommittee hearings that will examine aspects of FHA's business model other than its traditional single family portfolio, including its multi-family, reverse mortgage and hospital programs. Those subsequent hearings will identify other reform ideas that will help us put the finishing touches on any reform proposals produced by the Committee.

"As we embark on the legislative process, there are four principles that I believe the Committee must address:

"First, we must get FHA back on sound financial footing so taxpayers are better protected.

"Second, we must clearly define FHA's mission to ensure that the Agency is narrowly focused on serving first-time homebuyers and creditworthy low-to-moderate-income borrowers.

"Third, we must shift risk away from the taxpayers and into the private sector by reducing FHA's footprint and make sure the Agency is complementing the private sector, not directly competing with it.

"Finally, we must ensure that FHA runs its MMI Fund according to the basic tenets of insurance, including evaluating its risk according to actuarial principles and correlating premiums to actual risk.

"I look forward to working with the stakeholders in the room today - and others who may not be here - to achieve these principles and put together a sensible FHA reform package. I also look forward to working with Ranking Member Capuano and his colleagues to report out what I hope to be a bipartisan bill."

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