"In recent testimony before the U.S. House Financial Services Committee, Federal Housing Administration (FHA) Commissioner David Stevens emphasized that “based on current projections, absent any catastrophic home price decline, FHA will not need to ask Congress and the American taxpayer for extraordinary assistance [and] will not need a bailout” (“FHA Digging Out After Loans Sour,” Nov. 4).Just one week later, Commissioner Stevens and U.S. Department of Housing and Urban Development Secretary Shaun Donovan held a press briefing, which affirmed that with $31 billion in total reserves, the agency will not need to seek support from the American taxpayer under even some of the most extreme economic scenarios. Furthermore, FHA continues to fill a void in the market by insuring single- and multi-family loans to qualified buyers who might not otherwise be able to secure a loan at a reasonable cost. While the agency faces a number of challenges, it is currently implementing necessary reforms, including additional real-time monitoring of portfolio performance and delinquency, default and economic conditions, in order to help minimize risks to remaining capital.
In addition, many experts agree that the worst is over. Default rates on FHA loans made recently are not anticipated to be as great as previous loan defaults. The credit quality of recently FHA-insured borrowers has also gone from an average FICO score of 633 two years ago to 693 today, making the loans that the agency is insuring now less risky.
We must not forget that for 75 years FHA has played a pivotal role in the home financing system by providing single- and multi-family home loans to qualified borrowers that might not otherwise be able to secure a loan at a reasonable cost.
FHA does, of course, face a number of financial and capacity challenges, but the agency is more important than ever and remains integral to the housing recovery."
To learn more, please view this NHC Statement:
Toll of Housing Crisis on FHA Reserves Illustrates Agency’s Pivotal Role in the Recovery