FHA Watch, April 2013 (Vol. 2, No. 4)

Article Highlights

  • FHA’s estimated GAAP net worth equals –$30.63 billion, with a capital shortfall of $51–71 billion.

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  • FHA's accounting practices wouldn't fly with any other regulator.

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Read Volume 2, Number 3, March 2013.
Explore the Nightmare at FHA project.

This Issue’s Highlight

Government Accounting Principles: Neither Accounting nor Principles

Much misinformation exists regarding the rigor of the Federal Housing Administration’s (FHA’s) capital adequacy standards compared to the private sector. Recently, this statement was made at a House Committee on Financial Services’ Insurance Subcommittee hearing:

The requirement of FHA to hold 30 years’ worth of expected claims is 30 times more than that required of banks, which are only required by the Financial Accounting Standards Board to hold one year of reserves.

Any private financial institution that proposed to calculate its capital in the same manner as the FHA would be stripped of its charter before being escorted out of the room by its prudential regulator.

This Month’s Features

Spotlight on Insolvency
FHA’s Estimated GAAP Net Worth Equals –$30.63 Billion, with a Capital Shortfall of $51–71 Billion

Spotlight on Delinquency
Overall Rate Declines to 15.21 Percent

Spotlight on Best Price Execution
FHA, VA, and USDA’s Pricing Dominance Increase

Spotlight on Government Accounting Principles: Neither Accounting nor Principles
Comparing the FHA’s Safety and Soundness Regulatory Regime to the Private Sector’s

End the Nightmare at FHA
Fundamental and Comprehensive Reform of the FHA Is Urgently Needed

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About the Author

 

Edward J.
Pinto
  • American Enterprise Institute (AEI) resident fellow Edward J. Pinto is the codirector of AEI’s International Center on Housing Risk. He is currently researching policy options for rebuilding the US housing finance sector and specializes in the effect of government housing policies on mortgages, foreclosures, and on the availability of affordable housing for working-class families. Pinto writes AEI’s monthly Housing Risk Watch, which has replaced AEI’s FHA Watch. Along with AEI resident scholar Stephen Oliner, Pinto is the creator and developer of the AEI Pinto-Oliner Mortgage Risk, Collateral Risk, and Capital Adequacy Indexes.


    An executive vice president and chief credit officer for Fannie Mae until the late 1980s, Pinto has done groundbreaking research on the role of federal housing policy in the 2008 mortgage and financial crisis. Pinto’s work on the Government Mortgage Complex includes seminal research papers submitted to the Financial Crisis Inquiry Commission: “Government Housing Policies in the Lead-up to the Financial Crisis” and “Triggers of the Financial Crisis.” In December 2012, he completed a study of 2.4 million Federal Housing Administration (FHA)–insured loans and found that FHA policies have resulted in a high proportion of working-class families losing their homes.

    Pinto has a J.D. from Indiana University Maurer School of Law and a B.A. from the University of Illinois at Urbana-Champaign.

  • Phone: 240-423-2848
    Email: edward.pinto@aei.org
  • Assistant Info

    Name: Emily Rapp
    Phone: 202-419-5212
    Email: emily.rapp@aei.org

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