HUD Written Testimony of Edward L. Golding
February 11, 2016
Hearing before the House of Representatives Committee on Financial Services, Subcommittee on Housing and Insurance
Thank you, Chairman Luetkemeyer and Ranking Member Cleaver, for the opportunity to testify about the ongoing work of the Federal Housing Administration (FHA).
Since 1934, the FHA has played a critical role in the U.S. housing market. Born out of the Great Depression, the FHA has a dual mission: 1) to ensure access to affordable credit for housing to underserved borrowers and markets; and 2) to act as a countercyclical force that sustains the housing market in difficult or uncertain times, reducing negative economic impacts on the economy. In recent years, FHA has been called upon to play both roles – in response to the crisis and as the economy and housing market continue to recover.
By making sure borrowers, particularly first-time homebuyers, have access to affordable credit to purchase homes, FHA supports and expands the middle class, helps families put down roots in communities, and gives them the opportunity to accumulate wealth and build long-term financial stability. With the tendency of the private marketplace to restrict credit, especially in the face of uncertainty or risk, FHA’s presence helps to create a balance that allows for stability in the housing market and extends opportunity for homeownership to a much broader segment of the population.
FHA’s Mutual Mortgage Insurance Fund (MMIF or “the Fund”) bore the strain of the Great Recession, falling below its required capital reserve and eventually taking a mandatory appropriation in 2013. However, FHA’s focus on risk management, increasing revenue, and program improvements resulted in the ratio returning to 2 percent in 2015. This achievement was the result of FHA’s prudent policy changes, and an ability to work with Congress to pass stabilizing legislation and quickly implement program changes over the course of several years.
This significant increase in value has coincided with the slow, but steady improvement in the state of the U.S. housing market. U.S. Census Bureau data show that recent building permits are up more than 14 percent over the previous year and total housing starts for 2015 were nearly 11 percent higher than 2014.1 National unemployment has fallen to 5 percent, while consumer confidence and home prices continue to rise.2
Today, FHA’s position is strong and continues to improve. FHA remains committed to its mission to address underserved borrowers and mortgage markets and this testimony discusses FHA’s most recent Annual Report and offers a closer examination of the impact of FHA’s Home Equity Conversion Mortgage (HECM) program.
Source: HUD (full written testimony)