Time to make sure taxpayers aren’t on the hook again for Washington’s failures
Washington, DC – December 1, 2011 – (RealEstateRama) — At today’s House Financial Services Committee hearing to evaluate the financial health of the Federal Housing Administration (FHA), Rep. Ed Royce (R-CA), a senior member of the House Financial Services Committee and one of the few members to oppose every bailout, pressed Secretary Donovan on the need to prevent a taxpayer bailout of the FHA.
“In 2008 and 2009, some of us were warning about the potential risk of this government agency heading toward their statutorily mandated 2% capital reserve ratio. Yet time and time again we were reassured that the FHA was fine and the reforms being made were going to prevent a bailout,” Royce said.
The House Financial Services Committee hearing comes only days after an independent auditor’s report found the FHA, which insured one third of new mortgages last year, may need a taxpayer funded bailout next year. Royce went on to argue during his opening statement:
“Even as late as October of 2009, then FHA Director Stevens said to this Committee ‘we will not need a bailout’.
“In reviewing Secretary Donovan’s prepared remarks it appears he will be singing a less optimistic tune today. Given the troubling FY2011 Actuarial Report, I can see why.
“The MMIF’s capital reserve ratio is now at .24 percent — a fraction of the statutorily mandated 2 percent — and it’s running a leverage ratio that would give every regulator pause at 244-to-1.
“The obvious question I hope we get answered is — what’s next? What is the solution for preventing a taxpayer bailout of the FHA – which is staring us in the face? I think it is clear that banking on a strong housing rebound isn’t the answer.”
