By Brian Summerfield, Online Editor, REALTOR® Magazine
In an address to hundreds of REALTORS® at the 2009 NAR Conference & Expo Saturday afternoon, FHA Commissioner David Stevens offered a fervent defense of the organization’s financials. He specifically addressed the negative press surrounding the FHA’s recent audit, which showed part of its capital reserves below congressionally mandated levels.
Stevens distinguished the FHA’s capital reserves for unexpected losses from its regular reserve fund, which remains above 2 percent. Together, the two funds equal almost 4 percent in reserves. “We’ve come through the 100-year flood,” he said. “Despite the crisis, FHA is still standing with $31 billion in capital, $3.5 billion more than it had a year ago.”
For this reason, Stevens said comparisons between the FHA and bailed-out companies and GSEs are “ludicrous.” As he pointed out, the FHA was a small part of the market until recently, mainly because it didn’t offer exotic financial products. (It currently comprises about a quarter of the residential mortgage market.)
Right now, the FHA is performing exactly as it should, Stevens said. “FHA has always played a counter-cyclical role in the housing finance system,” he explained. “It’s designed to provide stable sources of capital in an unstable world. Without FHA, there would be no market, and this economic recovery would be significantly slower.”
He also defended the government’s economic relief and stimulus efforts, much of which has been financed with unprecedented deficit spending. “Worrying about deficits right now is like worrying about water conservation when your house is on fire,” he said. “We’re seeing home prices stabilize, and your own Chief Economist [Lawrence Yun] predicts home prices will rise next year. That didn’t happen by accident. That happened because of the stimulus.”
More on the FHA and Stevens here and here.