July 24, 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 on “The FHA Solvency Act of 2013”:  
"Thank you, Mr. Chairman.
"The Federal Housing Administration (or FHA) has helped millions of Americans achieve the dream of owning a home.
"Unfortunately, the FHA has also experienced higher than expected default rates over the last several years.
"In addition to placing severe financial stress on the insurance fund, these defaults have caused hardships for the very people the FHA was designed to help.
"Concerns about the solvency of the FHA have been building for quite some time.
"The capital reserve ratio has been declining since 2006 and the FHA fund has been in violation of statutory mandates for minimum capital levels for the last four years.
"The last independent actuarial showed a negative economic value of more than $16 billion and a capital reserve ratio of negative 1.44 percent.
"Therefore, Chairman Johnson and I have released the discussion draft before us today.
"The draft attempts to address a number of the problems facing the FHA through three overarching approaches:
1)    Give the FHA the tools it needs to better protect the fund from participants who do not follow the FHA guidelines or who consistently do not perform to appropriate standards.
2)    Ensure that personnel and experts with the appropriate backgrounds will review, revise and annually reevaluate the FHA’s standards to make its lending more sustainable.
3)    Increase the FHA’s capital allocation and better incentivize leadership to meet those capital requirements, so that the taxpayer is better protected in the future.
"This bill is intended to put the FHA in a better position to function as an actual insurance fund.
"It will also place a renewed emphasis on the FHA insuring sustainable mortgages. 
"When the FHA helps people obtain a mortgage which they actually have the ability to repay, it is helpful to the solvency of the FHA. 
"We should also be clear that the bill is not the last discussion this Committee will have on reform of the FHA.
"The Chairman and I have indicated that upon the completion of Committee action on this bill, we plan to immediately turn our attention to broader housing finance reform legislation.
"It will be necessary to address many of the broader questions surrounding the scope and mission of the FHA as part of that effort.
"I look forward to working with the Chairman and all of my colleagues on the Committee, regarding both the FHA and the broader housing market.
"However, before us today is a bill that we can consider now—one that would take much-needed steps towards changing the disturbing negative trends the FHA has experienced through the last several years.
"I thank HUD for being here today to discuss this draft with us.
"I also thank the number of industry, consumer and taxpayer advocate groups who have reviewed this draft and taken the time to get back to us directly with their thoughts and comments.
"I encourage continued public comment aimed towards further strengthening this bill as we move forward.
"As I have previously noted: nearly every American has a stake in our actions.
"Whether they are looking to buy or sell a home or they are simply taxpayers who are weary of seeing news of another bailout, our decisions today and beyond will impact them.
"I hope we can soon take this much-needed first step.
"Thank you, Mr. Chairman."