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FHA Could Face Huge Losses

Posted by Steve Markowitz on June 4, 2013

The Wall Street Journal reported on the potential for massive losses at the Federal Housing Administration (FHA).  According to the Journal, under an extreme economic scenario the FHA could lose $115 billion over 30 years requiring substantial taxpayer funding.

The $115 billion potential loss figure emanated from a new stress test used to determine risk of FHA loans using an analysis employed by the Federal Reserve board instead of an independent actuarial review previously used.  This more realistic test nearly doubled the potential loss figure.

In addition, the FHA attempted to hide the potential losses from Congress and taxpayers.  The House Oversight and Government Reform Committee asked the agency why it had not disclosed the use loss figure.  This came on the heels of FHA internal documents suggesting that the potential loss be hidden from the public and Congress.

There are troubling aspects of this potential loss for the FHA.  First, in its first 79 years the FHA never required taxpayer support.  In addition, this is yet another example of a government or government backed agency’ lack of transparency with the People who they are supposed to be working for.


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