Exclusive study reveals how agency policies are backfiring, setting working class families up to fail

How the FHA hurts working-class families and communities

A groundbreaking study released today by AEI's Ed Pinto, a housing expert and executive vice president and chief credit officer at Fannie Mae in the 1980s, reveals never-before-available data at the zip-code level on projected foreclosure rates for families getting FHA loans nationwide.

The results are dramatic: nationally, there are over 9,000 zip codes with a projected foreclosure rate of 10% or more on FHA-backed loans. On average in these zip codes, 1 in 7 families will likely lose their home to foreclosure.

The full study can be found at www.NightmareAtFHA.com, which features interactive maps with zip-code level data highlighting 11 major cities – including New York City, Washington DC, and Chicago -- along with other information about the study.

FHA's current policies are financing failure for working-class families. The terms of the FHA loans are putting families on a tight-rope, where they could be ‘one car repair’ or ‘one lost work shift’ away from losing their home. The combination of low down payments, poor credit, and high debt-to-income ratios sets families up for failure.  The resultant foreclosures -- along with destroyed credit and loss of the very equity families were working to build -- dashes their dream of home ownership.

Recent news reports have noted that FHA had a negative $15 billion dollar economic value in November of this year (which is actually closer to a $35 billion deficit if you factor in current low interest rates). To now discover that FHA is inflicting such pain on America’s working class families is unconscionable.  With the housing market being such a critical piece of the economy, the FHA's financing failure deserves further attention, especially if taxpayers are going to be asked to pick up the tab.

Ed Pinto has presented the results of his study to government and industry leaders and is available to discuss the study.

For additional help, or for other media inquiries, please contact AEI Media Services at mediaservices@aei.org or (202-862-5829).

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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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