The Federal Housing Administration’s (FHA) capital reserve fund decreased in fiscal year 2017, prompting calls for reform from some lawmakers.
The FHA’s capital reserve fund is supposed to be at least 2 percent of the $1.23 trillion of mortgages it guarantees. The FHA’s FY 2017 annual report showed that the capital reserve ratio dropped from 2.35 percent to 2.09 percent, just slightly above the 2 percent threshold.
House Financial Services Committee Chairman Rep. Jeb Hensarling (R-TX) said this needs to be addressed by Congress.
““FHA has suffered a severe case of mission creep, and the unfortunate truth is that the lack of sound underwriting and risk management puts taxpayers, homebuyers and our overall economy in harm’s way,” Hensarling said. “The danger is real. Unless and until Congress passes serious reforms to give Americans a sustainable housing finance system, we will constantly be on the edge of another housing meltdown and financial crisis.”
The FHA, to be successful, must have a clearly defined mission to ensure homeownership opportunities for first-time homebuyers and low-income families, Hensarling said.
Since the financial crisis of 2008, the FHA has been diverted from its mission of focusing on first-time homebuyers and low- or moderate-income borrowers. Hensarling said it morphed from a mortgage insurer of last resort to a dominant component of the mortgage finance system by expanding into higher income borrowers.
“I once again commend President Trump’s decision to suspend the outgoing Obama administration’s ill-advised and 11th-hour rule change on FHA mortgage insurance premiums. Without this action by President Trump on his first day in office, this annual report confirms that the FHA would be in even worse shape today,” Hensarling added.