National Association of Realtors tries to present FHA myths as 'facts'

Diana Parkhouse (Flickr) (CC BY 2.0)

Article Highlights

  • For over 60 years the housing lobby has claimed "now" is a bad time for reform.

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  • No matter how hard the NAR tries to change the facts, this is not your great-grandmother's FHA.

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  • Since 1975, an estimated 3.2 million FHA homeowners had their dreams turned into nightmares.

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The National Association of Realtors (NAR) is at it again. Not being satisfied with the FHA’s decades-long lending nightmare that resulted in an estimated 3.2 million dashed homeowner dreams since 1975, it is launching a new ad campaign entitled “FHA Facts”. Their “facts” are cold comfort to the half million working-class families getting loans from the FHA since 2008 who will lose their homes to foreclosure. These families will lose a sizable portion of their savings and see their credit ruined because the FHA set them up to fail.

The housing lobby says that “now” is a bad time for reform. They’ve said that for over 60 years. American families who face the crushing fact of foreclosure can’t afford to wait for the housing lobby to embrace common-sense changes to restore FHA’s vital mission of providing responsible credit to working class families and first-time home buyers.

Presents the following myths as:

No matter how hard the NAR tries to change the facts, this is not your great-grandmother’s FHA.

Fact: FHA’s so called safe lending since 2008 will result in a half million foreclosures (source: HUD documents).

Fact: FHA’s abusive lending practices are particularly harmful to working class families and neighborhoods (source: www.NightmareAtFHA.com).

Fact: Since 1975 an estimated 3.2 million FHA homeowners had their dreams turn to nightmares (source: HUD documents).

Fact: Today’s FHA’s lending standards are not “exactly the way Congress designed it to operate 80 years ago”.

  •     Maximum loan-to-value: 80% in 1934 vs. 96.5% today
  •     Maximum loan term: 20 years in 1934 vs. 30 years today
  •     Insurance claim rate: 0.2% cumulative claim rate from 1934-1954 (2.9 million loans) vs. 10.6% average annual claim rate from 1975-2011 (30 million loans)
  •     Insurance loss rate: 9% average from 1934-1954 vs. 63% in 2012
  •     FHA loss rate has increased 400 times, having gone from a 0.02% loss rate (1934-1954) to 7% loss rate today
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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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