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Veissi: No Time to Risk Harm to FHA

NAR President Moe Veissi has made a forceful case before a key congressional committee to protect FHA from potentially destabilizing changes to the agency’s main insurance fund. Some lawmakers have been talking about curbing the agency as a step toward reducing the federal government’s role in home ownership and also to shore up its reserves.

The agency maintains two reserves for its housing insurance program. One requires reserves for 30 years against loan losses, and another is a smaller reserve above and beyond the main reserve. The smaller reserve has dropped below a statutory limit.

Testifying before the House Financial Services Committee, Veissi said the housing market is showing signs of recovery, including in some areas that were among the hardest hit in the downturn. Should Congress make changes to FHA now, he said, while it’s one of the main home mortgage vehicles for households, the recovery could very well be derailed, and, with it, the struggling broader economy.

“If you diminish America’s opportunity, in any capacity, especially today when we’re just beginning to remove ourselves from one of the most horrendous housing situations the country has ever seen, then you do that at the peril of destabilizing the recovery,” he said.

More on NAR’s urging of caution before making changes to FHA.

Robert Freedman

Robert Freedman is manager of multimedia communications for the NATIONAL ASSOCIATION OF REALTORS®. He can be reached at rfreedman@realtors.org.

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  1. One thing FHA could do to stop many foreclosures is bring back the simple assumption of all existing FHA mortgages. This one thing will create millions of new homebuyers instantly! Stop the bailouts and let the free market work. We REALTORS can take it from there. We will turn the market around in no time.

  2. Mark Street

    Until the S&L meltdown in the 1980s, FHA operated as a conservative insuror of lenders against loss on high ratio loans. It ran largely, if not entirely, without cost to the taxpayers. Think I’m kidding? Look it up.

    Reagan, Clinton and Bush (yes, all of them) opted on a “bread and circuses” approach to housing, Saint Ronnie more or less abolished construction standards. Slick Willie decided everyone should own a house, whether or not he she, or it had a pulse, nevermind an income. George the Third-Rate abolished underwriting.

    It was like “Lord of the Flies” – a bunch of fourteen-year-olds on holiday from discipline. I would get a call from an out-of-town mortgage broker asking me if a condo conversion was worth 200 K, which had been renting out three months earlier for $950. I would then be asked, “But will it appraise for that?” “Unfortunately, yes” I would say, confronted with a dozen “comparables” supporting the contract. Once one of these brokers called and asked me if she should buy one of these overpriced tulips for her own portfolio, and I told her I wouldn’t buy it with anyone’s money, and certainly not my own. She bought two.

    But I digress. My point is this. Not one, not a single one, of those mortgages was FHA insured. Not one. Of course I can speak only for my own experience. My assignments went from overwhelmingly FHA to almost exclusively “conventional” between 2000 and 2004, and I would be surprised if any residential appraiser’s experience differed much.

    FHA worked. It still works, and it would work better if it were more like it was in 1980 before everyone got so hysterical about “big” government. Now one of our great political parties has decided to declare war on anyone with “GS” in his/her job description, so FHA is being painted with the same brush as FHLMC, FNMA, and the Federal Reserve. Private, not government, organisations, FYI. Don’t believe me? Look it up.They are “government sponsored enterprises” (GSEs) which means the government provides them with lubricants for the party and Kleenex to clean up the mess (what the media calls subsidies and bailouts).

    FHA had very little to do with any of that. The insurance fund has taken a beating, to be sure, but it is the last stop. The value crisis is essentially over. Builders are now constructing spec homes, which means that there is profit out there in competing with all those scary foreclosures and short sales. The banks are beginning to sell off the real junk at real prices. And very little of that junk has any FHA fingerprints on it.

    A reinvigorated FHA, including staff appraisal and mortgage credit reviewers with teeth, can be a tool which will aid in our recovery now as it did in the 1930s. And it will cost the taxpayers next to nothing. Can we please, PLEASE get past this “government is evil” mantra? Sometimes government works. You wouldn’t privatize the Justice Department. You wouldn’t outsource the military to a foreign power. There are inherent and grotesque conflicts of interest in either notion. We tried turning the monitoring of housing finance over to the financiers, and it didn’t work. Let’s recognize that, as with the law of the land and the defense of our turf, the very roofs over our heads are a concern of all Americans. That’s you and me. The Government. It’s us. Just sayin’…

    If the FHA is broken, let’s get it back up to speed. Let’s not scrap it.

  3. Walt Lane

    Ludicrous on 2 levels that many lawmakers are sniffing around the idea of lessening the govs involvement in home ownership a la pranking around with FHA regs/guidelines in order to “shore up reserves” in the secondary guarantee reserve fund.

    Since the dawn of the “Great Society” (proven to be an oxymoron) initiatives, when has the Gov shown movement away from being less invovled any any aspect of our lives at any level. Now, via some theory of legislative genius(another oxymoron), they consider tampering with the one critical Fed Administration that has fulfilled its mission admirably since its inception. Gee guys, why dont we just shoot the dog to kill the fleas.

    Maybe its time we cut to the core of the social/political agenda(s) under current Obamanomics and recognize that any legislation that futher restricts capitalism (along with PRUDENTcredit availability) is “IN” and doing so at the continued suppression of our banking/lending institutions is part and parcel of that.

    Real estate/housing/construction industries have suffered enough and time we draw the line on Fed and State movement to further legislate and regulate. Kudos to the NAR and all related PACs who are doing battle with the very fundamentals of private property ownership and, in a very direct way, our freedoms and constitutional liberties.

    Steve Hicks’ posted comment of 12/5 above about restoring FHA assumptions is “spot on” and needs to become an agenda item for the NAR with all dispatch. The activity that would follow is not a cure-all but one of the sparks that will further fuel recovery.

    Go team !!!!

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