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Today's hearing regarding oversight of the Housing and Urban Development Department should be used as an opportunity to further examine the rising tide of strategic defaults, Brad Thaler, NAFCU's vice president of legislative affairs, urged the House Financial Services Subcommittee on Insurance, Housing, and Community Opportunity on Monday.

Thaler, writing panel Chairman Judy Biggert, R-Ill., and Ranking Member Luis Gutierrez, D-Ill., was referring to today's hearing featuring testimony from Federal Housing Administration Commissioner Carol Galante. NAFCU has urged the FHA to modify the rules on strategic defaults so those who can afford to pay their mortgages don't just walk away from them.

Thaler said the committee plays an important role in ensuring FHA and HUD policies sufficiently address strategic defaults. He reminded the lawmakers that FHA's current policies bar individuals who strategically default on their mortgage from securing another FHA loan for a minimum of three years. Fannie Mae, on the other hand, imposes a seven-year lockout on such borrowers. Thaler said FHA's policy fails to adequately dissuade borrowers from strategically defaulting.

"Considering the subcommittee's concerns about the solvency of the FHA, ensuring the FHA is not propped up as a safe haven for those who strategically defaulted on previous mortgages is a critical part of the safety and soundness conversation," Thaler said. "NAFCU and its member credit unions are hopeful this issue will be further examined by the subcommittee."

Thaler also noted NAFCU's formal request earlier this month to HUD and the FHA that the agencies institute policies as soon as possible to discourage strategic defaults.

He added that although credit unions were not involved in the unscrupulous activities that led to the housing crisis, they and their members have been affected. "The increasing trend of homeowners who have the capacity to make their mortgage payments but instead choose to default is troubling to community-based financial institutions like credit unions," said Thaler.