Galante defends FHA, denies bailout
Oct. 30, 2013 – Federal Housing Administration Commissioner Carol Galante, during a hearing Tuesday by the House Financial Services Committee, defended the agency’s announcement that it needed $1.7 billion from Treasury to meet a requirement of the Federal Credit Reform Act.
Galante denied that the draw is a bailout, and instead cited that FHA must hold reserves against possible losses for 30 years and can't take future revenue in account.
“This mandatory appropriation of $1.68 billion is not an indication of FHA’s cash position or its ability to pay claims on outstanding loans insured by the MMIF,” or Mutual Mortgage Insurance Fund, she said in written testimony. “Rather, it is a function of FHA’s obligations under Federal Credit Reform to maintain sufficient reserves to pay all expected losses as measured each year at a single point in time, and therefore does not account for the effect of future endorsements. Today, FHA has over $48 billion in its financing account.”
Committee Chairman Jeb Hensarling, R-Texas, was particularly critical of the agency, calling it a “high risk to taxpayers and to the mortgage insurance market.” He touted his proposed Protecting American Taxpayers and Homeowners (PATH) Act, which would reform the agency and wind down Fannie Mae and Freddie Mac over a five-year period.
NAFCU supports some provisions of the PATH Act – particularly measures that would ease some of the regulatory burden of CFPB’s mortgage rules. However, it is strongly urging Congress to preserve unfettered, government-guaranteed access to the secondary mortgage market for credit unions as part of any reform package. Such a guarantee is not included in the current PATH Act.