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FHA Commissioner Says Agency Won't Need Bailout10-21-09 | News

FHA Commissioner Says Agency Won't Need Bailout

David Stevens, the commissioner of the Federal Housing Administration.

David Stevens, the commissioner of the Federal Housing Administration (FHA) testified on Capitol Hill in early Oct. 2009 that about 20 percent of FHA loans insured in 2008, and as many as 24 percent of those from 2007, face serious problems, including foreclosures.

Stevens, however, assured lawmakers the agency would not need a bailout like Fannie Mae and Freddie Mac ($96 billion and counting), and that FHA is managing its risks.

Stevens told the congressional committee: "Let me simply state at the outset that based on current projections, absent any catastrophic home price decline, FHA will not need to ask Congress and the American taxpayer for extraordinary assistance. We will not need a bailout."

The New York Times, however, reports that at least one expert believes FHA will need a government bailout.

Edward Pinto, a former Fannie Mae executive, testified at the hearing: "It (FHA) appears destined for a taxpayer bailout in the next 24 to 36 months." Pinto was the chief credit officer for Fannie Mae from 1987 to 1989. He predicts FHA losses could wipe out the agency's $30 billion in cash reserves.

FHA was created in 1934 to help lower-income and first-time buyers purchase homes with low down-payment mortgages.

FHA insures roughly 5.4 million single-family home mortgages, with a combined value of $675 billion. The loans are sold as mortgage-backed securities and guaranteed through the Government National Mortgage Association, aka Ginnie Mae.