February 28, 2013


WASHINGTON – U.S. Senator Mike Crapo (R-ID), Ranking Member of the Senate Banking, Housing and Urban Affairs Committee, today delivered the following remarks during a Banking Committee hearing addressing the Federal Housing Administration’s (FHA) financial condition and program challenges:  
"Thank you, Mr. Chairman.
"Since its creation in 1934, our nation has depended upon the Federal Housing Administration (FHA) to help first time homebuyers, as well as low- to moderate-income Americans, achieve their dreams of homeownership.
"There are undeniable benefits derived from homeownership for both the families who buy and the broader community, as long as the purchase of that home is achieved through responsible, sustainable means.
"When the FHA operates in a safe, viable manner, it can help many deserving people gain a foothold in our housing market who otherwise might not have been able to do so.
"That is why today’s hearing comes at such an important time for the FHA.
"The taxpayers who stand behind the FHA, as well as future potential homebuyers depending upon FHA, look to us now to enact reforms that will return the FHA to a sustainable path.
"If we do this, the FHA can remain a viable option for our future generations.
"If we do not, the future is much more uncertain.
"The current situation surrounding the solvency of the FHA is concerning, to say the least, and at worst, it is unsustainable.
"Just the results of the most recent independent actuarial report—a negative economic value of more than $16 billion, with a capital reserve ratio of negative 1.44 percent—would be problematic, even if they were only considered in a vacuum.
"However, nothing should be considered in a vacuum.  What is most troubling is that these numbers are part of a continued negative trend we see in these reports, year after year.
"Despite assurances from the FHA that capital shortfalls were temporary, for the last four years the FHA fund has been in violation of statutory mandates for minimum capital levels.
"Worse yet, the capital reserve ratio has actually been in decline every year since 2006.
"Perhaps worst of all, many experts believe that the FHA is actually underestimating its risk exposure.
"If this is true, the taxpayer could be far more exposed to losses than is even currently estimated.
"Unfortunately, this continued trend of declining capital leads one to the inevitable conclusion that the FHA has a fundamental problem building and maintaining adequate capital to protect the taxpayer.
"As such, it is our duty to look at a broad range of reforms aimed at returning the FHA to a strong, self-sustaining insurance program.
"Many experts have told us that there is no one perfect solution that will fix all of the FHA’s problems.
"Ideas such as strengthening indemnification provisions, examining premium structures, tightening underwriting, increasing transparency, increasing borrower equity and reducing risk layering are just some of the proposals that have been put forth by experts in the housing community.
"However, we should not kid ourselves that any one of these or any other suggested reforms by themselves represent an easy, quick fix to the solvency concerns at the FHA.
"Instead, this Committee needs to come together to craft bipartisan legislation that will best equip the FHA to accurately assess its risks and build capital to insure against them.
"Additionally, as the Committee responsible for oversight of the FHA, we must remember the FHA is an insurance fund and the FHA needs to operate it as such.
"Even as we deliberate additional authorities that the FHA may need, the FHA needs to fully utilize the authority currently at its disposal to ensure that it does not require a taxpayer bailout.
"While the FHA does that, hopefully this hearing can move us closer to this Committee taking action to improve the solvency of FHA.
"Nearly every American has a stake in this hearing and our subsequent actions.
"They may be a young family starting out and hoping to buy their first home; a retired couple looking to sell their home and move closer to their grandkids; or taxpayers worried about the consequences of inaction.
"Regardless of their situation, whether they know it or not, nearly all of our constituents suffer if we continue down this current path.
"Mr. Chairman, thank you again for holding this hearing."