The Federal Housing Administration, the next housing crisis?

[Geee]

The Hill:

Two oversight hearings on the Federal Housing Administration (FHA) have helped shed light on an agency that runs a $1 trillion mortgage insurance program originally designed to help low- and moderate-income individuals buy a house if they cannot provide a 20 percent down payment. The FHA is the largest single provider of mortgage insurance and provides a 100 percent guarantee of payment to lenders should the homeowner default.

 

The House Financial Services Committee heard testimony from Housing and Urban Development Secretary Julian Castro on Feb. 11 and the Housing and Insurance Subcommittee heard from several witnesses on Feb. 26.

 

On the day of the second hearing, Citizens Against Government Waste named Castro the February "Porker of the Month" for, among other reasons, "planting the seeds for the next major housing bailout and failing the most basic financial transparency test about FHA finances."

When queried by members of the committee about the January 2015 premium reduction as well as the FHA's precarious financial status, Castro was at pains to provide even basic information about the current value of the FHA portfolio. He also refused to admit that the FHA was operating outside of the law, could not say when it would achieve the 2 percent capital reserve benchmark and repeatedly delivered a series of meaningless platitudes about the benefits of homeownership. Rep. Scott Garrett (R-N.J.) pointed out that the FHA has offered "pricing gimmicks" while lowering its credit standards, down payment requirements and premiums, which are tactics that have been criticized elsewhere as "predatory lending."