BUBBLE, BUBBLE TOIL AND TROUBLE: The Federal Housing Administration, the next housing crisis?

When queried by members of the committee about the January 2015 premium reduction as well as the FHA’s precarious financial status, Castro was at pains to provide even basic information about the current value of the FHA portfolio. He also refused to admit that the FHA was operating outside of the law, could not say when it would achieve the 2 percent capital reserve benchmark and repeatedly delivered a series of meaningless platitudes about the benefits of homeownership. Rep. Scott Garrett (R-N.J.) pointed out that the FHA has offered “pricing gimmicks” while lowering its credit standards, down payment requirements and premiums, which are tactics that have been criticized elsewhere as “predatory lending.”

Ironically, on the same day that Castro testified, the FHA was once again included on the Government Accountability Office’s High Risk List due to the agency’s “substantial growth in its insurance portfolio and significant financial difficulties.” The FHA has been on the list since 2009.

On the other hand, there have been excellent opportunities for graft.