Finally, the Federal government is asking itself whether it is helping the industry or hurting it. Yesterday the House of Representatives held a hearing to “examine private sector involvement in the housing market in order to determine if the high amount of government participation is a hindrance to the sector’s recovery.” They concluded that there is probably too much government support in the industry. Currently, the FHA, Fannie Mae and Freddie Mac together share in more than 90 percent of the mortgage market while the FHA is supporting nearly a quarter of the multifamily rental market. David Stevens, FHA commissioner, emphasized that while this level of involvement in the market over the past two years “has been beneficial and necessary,” he stressed that private capital needs to return to a greater role in the housing sector in order for the housing market to remain healthy. Ted Tozer, president of Ginnie Mae, outlined other risks of high levels of government participation, pointing out that “the current level of [government] participation…in the market is unsustainable.”
While most of the officials testifying before the committee yesterday appeared to agree that government participation in the housing market must be scaled back, some also are requesting additional powers in the interim period while that exit is implemented. For example, Stevens also requested that the FHA have the power to “adjust fees and recoup losses on bad loans” on “all mortgages the agency insures”. He argued that the FHA currently has isolated authority to “go after” some lenders to recoup losses and that power should not be limited. Projected losses for the FHA are largely comprised of loans insured before 2009, and Stevens believes that the FHA can recoup more of its money and restore the far-too-shallow “rainy day fund” to government-mandated levels were it given more leeway in terms of recouping damages. The FHA is raising mortgage insurance premiums starting in April and is also considering raising the size of down payments on all loans it insures in the near future. It has already raised down payments for borrowers with weak credit.
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