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We're just weeks away from finding out whether that the federal housing administration's gonna need a taxpayer bailout on our next guest just testified on capital well.
Saying it's time for the troubled agency just changed -- -- that new.
Joining us now and it -- former chief credit officer Fannie Mae and is now a resident scholar at the American Enterprise Institute.
And this just feel like did several all of you again because back in two -- not if I'm not a stake in.
You testify before a subcommittee and he said there was a 54 billion dollar hole.
And then here we are again -- -- listening I -- Nobody is listening in the -- actually yet today FHA is.
Basically admitted that it's a 54 billion dollar hole just like I indicated.
The problem is that if FHA were a private mortgage insurer there isn't -- state insurance regulator in the country that are allowed top continue operating.
And this is really a threat to taxpayers.
And worse because they're in such -- -- condition than their allowed to continue.
If there's a recession anytime in the next three or four years there will be catastrophic losses that will make the -- that paper to be and do now looks small.
-- -- -- and they could face is sixteen point three billion dollar cash shortfall.
What's interesting to me though -- doesn't seem like they're changing their ways all that much right in your notes.
40% of the loans that they are that are out there are still have sub prime attributes so what do we do and.
Well FHA continues its ways of abusive lending that really harms working class families and neighborhoods.
And I I did a study in December that showed that they were over 6000 zip codes.
Where the average foreclosure rate is project to -- 15%.
And those are loans made in 2009 and 2010.
Now the they NAR is just started the National Association of Realtors has just start -- -- ad campaign.
Talking about the great work of FHA and they talk about safe lending the only problem is that since 2008 the lending and FHA is done.
By FHA's own numbers are gonna lead to a half a million foreclosures.
And in the last 37 years FHA lending has led to three and a quarter million foreclosures these are astounding numbers.
Like his -- were given money to people who just don't deserve it but yet -- -- ahead fix this problem there and it -- gonna raise rates thinking maybe that'll solve the problem.
As of April 1 you have higher mortgage insurance premiums.
Higher down payments -- loans over six -- -- five that's clearly not the answer.
That is clearly not the answer and I laid out in my testimony yesterday precisely how this should be done.
First you need to reduce some of the risk glaring.
You know of loan to value and the down payment and -- scores and other things debt ratios loan terms and secondly need to change some of the prophecies.
-- pointed to the veterans administration.
As an example of some best practices in the government.
That practices that FHA does not do and if they did I believe would reduce their foreclosure rates significantly.
Miami -- year notes at least sort of around 20%.
People with -- the scores under 600.
They projected that that they're going to foreclose or at least 30% of them will foreclose so clearly there's a correlation seems so obvious.
Right and of course the Consumer Financial Protection Bureau has literally ignored.
-- ability or willingness to pay -- credit scores as a factor.
And defining a prime loan it that we we really have a bizarre.
Situation developing where they've defined a prime loan as having nothing to do right with the willingness remarked they -- out of the down payment put up by the borrower.
It's totally mind boggling and I hope someone is listening to you because otherwise taxpayers are going to foot this bill Ed -- I'm afraid he'll probably be back to talk about this more.
Thank you sir thanks Tracy.
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