p Nightmare at FHA - March 2013 vol. 3

Selling hope, delivering harm 

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This Issue’s Highlight
FHA Fairy Tales

Veterans Affairs (VA) charges one-third the premium of the Federal Housing Administration (FHA) on a present-value basis and experiences a loss rate that is 20 percent of the FHA’s. VA mortgage-backed security (MBS) issuers absorb a loss rate 1.6 times that of FHA issuers yet are paid the same servicing fee and pay the same Ginnie Mae guarantee fee.

Implementing VA’s best practices, including reducing the FHA’s loan loss coverage percentage from 100 percent to 50 percent, would reduce the deleterious impact of FHA practices on working-class families and neighborhoods and help promote the responsible expansion of credit access to working-class families.

As demonstrated by the VA best practices over many decades, a coverage level well below 100 percent may be sustained without impacting the cost of FHA financing. Over time, the cost of FHA financing could go down.

This Month’s Features:

  • Spotlight on Insolvency
    FHA’s Estimated GAAP Net Worth Equals –$32.13 Billion, with a Capital Shortfall of $52–72 Billion
  • Spotlight on Delinquency
    Overall Rate Declines to 15.97 Percent
  • Spotlight on Best Price Execution
    FHA, VA, and USDA’s Pricing Dominance Little Changed
  • Spotlight on Differences Between the Practices of the VA and the FHA
    Comparing the VA’s and the FHA’s Loan Loss Coverage Percentages
  • End the Nightmare at FHA
    Fundamental and Comprehensive Reform of the FHA Is Urgently Needed