FHA Watch, November 2012

Article Highlights

  • FHA records -$34B economic value.

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  • FHA insurance in force and capital shortfalls are growing.

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  • FHA financial condition looking more dire than ever.

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Read Issue 10, October 2012.
Read Issue 9, September 2012.

FHA Watch, No. 11, November 2012

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This Issue’s Highlight

FHA Has a −$34 Billion Economic Value

The Federal Housing Administration’s (FHA’s) recently released FY 2012 Actuarial Study confirmed the decline in financial condition that FHA Watch has been tracking over the past year. While the Department of Housing and Urban Development (HUD) attempted to downplay the report, the FHA’s economic value is currently −$34 billion given today’s low interest rate environment.

The FHA’s insurance in force has been growing, as have its capital shortfalls. These trends and the FHA’s poor financial condition are cause for significant concern for Congress and taxpayers.

This Month’s Features

Spotlight on FHA’s Economic Value
FHA Has a −$34 Billion Economic Value

Spotlight on Insolvency
FHA’s Estimated GAAP Net Worth Equals –$25.38 Billion, with a Capital Shortfall of $45–67 Billion

Spotlight on Delinquency
Delinquency Rates Decline

Spotlight on Best Price Execution
FHA’s Pricing Dominance Eases as the FHA Announces Premium Changes

The Road Map to FHA Reform
Immediate Action Needed to Address the FHA’s Fiscal Crisis

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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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