On February 11, Edward Golding, Principal Deputy Assistant Secretary for the HUD Office of Housing, testified before the House Financial Services Subcommittee on Housing and Insurance on the financial health and status of the Federal Housing Administration (FHA), particularly in regard to its Mutual Mortgage Insurance Fund (MMIF).
In 2015, HUD reported to Congress that the FHA MMIF capital reserve ratio met its statutorily required 2% threshold for the first time since 2008. However, Republican members of the Subcommittee voiced concern for the overall health of the fund, saying that without a spike in the value of FHA’s “volatile” reverse mortgage program, the fund would not have met the 2% threshold. Republican members also accused FHA of growing its market share beyond its historical target population of first time and low and moderate income homebuyers, and thus crowding out the private market.
In his opening remarks Subcommittee Chair Blaine Luetkemeyer (R-MO) stated, “FHA has suffered a case of mission creep, and the unfortunate truth is that the lack of sound underwriting and risk management puts both homebuyers and U.S. taxpayers at risk. While the most recent independent actuarial report showed signs of a modestly healthier agency, the bottom line is that FHA is still in a precarious state.”
Mr. Golding defended the health of the MMIF, testifying, “FHA’s Mutual Mortgage Insurance Fund bore the strain of the Great Recession, falling below its required capital reserve and eventually taking a mandatory appropriation in 2013. However, FHA’s focus on risk management, increasing revenue, and program improvements resulted in the ratio returning to 2% in 2015. This achievement was the result of FHA’s prudent policy changes, and an ability to work with Congress to pass stabilizing legislation and quickly implement program changes over the course of several years.”
Mr. Golding did concede, however, that an economic downturn would jeopardize the health of the fund, saying “If a Great Recession were to start tomorrow, I don't believe that we would be able to sustain a positive capital reserve ratio.”
During the hearing, Representative Keith Ellison (D-MN) asked Mr. Golding what FHA was doing to help address the nationwide rental housing crisis faced by low income families. “Current estimates are that nearly 12 million low income people pay more than half their income for rent and according to the Harvard Joint Center for Housing Studies report, one in two households spend more than 30% of their gross income on rent and utilities. One in four households pays more than 50% of their gross income for rent and utilities,” Mr. Ellison stated. “And in my district, 10,000 low income families are on the waiting list for assisted housing.”
Mr. Golding responded that FHA was specifically addressing the crisis through its multifamily program. He said, “We support construction of new properties. We reduced the insurance premiums (for affordable housing) in order to attract more capital into that sector so that we get more construction, more units and more proceeds for rehab. So that it’s not just the construction, but it’s the substantial rehab. And our multifamily program is continuing to focus on that area. As you know, our rental assistance demonstration program is also putting more capital, nearing $2 billion, and about 35,000 units preserved in terms of affordable housing. But with those numbers [that you presented], we clearly are only chipping away at what is a huge problem.”
Read Edward Golding’s testimony here: http://financialservices.house.gov/uploadedfiles/hhrg-114-ba04-wstate-egolding-20160211.pdf
Watch the archived webcast of the hearing here: http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=400266