FSC Majority | Week in Review
Posted by Staff on February 13, 2015
Committee Examines Risky Practices at FHA

The committee held a hearing on Wednesday to examine the fiscal health of the Federal Housing Administration (FHA) and heard testimony from Housing and Urban Development Secretary Julian Castro.

"We all recall the famous admonition from Spanish philosopher Santayana who said, 'Those who do not remember the past are condemned to repeat it.' History has taught us that the root cause of the financial crisis was not deregulation but dumb regulation and helping put people into homes they could not afford to keep. Now the FHA, with exceedingly low down payments and a recently announced approximately 40 percent cut in its premiums, appears to be doing that. All at a time where the FHA continues to violate federal law by keeping a woefully insufficient capital reserve and right after receiving its first ever taxpayer bailout,” remarked Chairman Jeb Hensarling (R-TX).

In its coverage of the hearing, the Wall Street Journal noted that since 2009 the FHA has been in violation of the law which requires the agency to have a capital buffer equal to at least two percent of the loans it guarantees.  While Secretary Castro told the committee the premium cuts would push back the FHA’s return to the two percent threshold by only “a few months,” the Journal reported that Moody’s Analytics Chief Economist Mark Zandi and others have said “the fund might not return to the two percent level until 2018, two years later than an estimate made by the FHA’s independent actuary in November.”

After questioning from Rep. Sean Duffy (R-WI), “Castro acknowledged that the 50-basis-point reduction in fees would slow full restoration of the fund," noted the American Banker. "Duffy said it was proof of Republican arguments."

“Republicans cite the FHA’s need for a $1.7 billion draw from the Treasury in 2013 to shore up its reserve fund as reason to be concerned about the agency’s failure to move faster toward the two percent level,” The Hill reported in its coverage of the hearing.

Coming to your inbox on Sunday afternoon in this week’s Video Message:  Rep. Andy Barr (R-KY) will discuss why hardworking taxpayers should be concerned the FHA is putting them and homebuyers at risk.

Committee Holds Markup of Views and Estimates

At Thursday’s full committee markup, Chairman Hensarling said “[The] debt….represents roughly $160,000 of debt for every American household.”

"That particular debt you see on the clock today represents roughly $160,000 of debt for every American household. That comes out of their American dream. That is funds that cannot be used to send kids to college. Those are funds that can no longer be used to pay for health care premiums that have risen. They are funds that cannot be used to capitalize a new small business so that again they can achieve their American dream," said Chairman Hensarling.

"The Budget Views and Estimates that have been put together today will help this committee and help the Budget Committee guide our proceedings to ensure that we can help low and middle-income Americans in their pursuit of happiness and that we can ensure that we do not leave a legacy of debt for our children and our grandchildren and betray the American dream; which is not the fancy new car, it is not the new home with the kitchen and the granite countertops. The American dream is ensuring that our children and grandchildren have greater opportunities, greater freedom and a higher standard of living than we have enjoyed," added Chairman Hensarling.


Rep. Andy Barr | Congressman holds roundtable with bankers
A reintroduced bill could allow for more homeowners in Scott County, as well the creation of new jobs, said U.S. Rep. Andy Barr of Kentucky at a roundtable discussion with Scott County bankers. The Portfolio Lending and Mortgage Act would “expand the access of mortgage credit to the citizens of Scott County and all across the country,” he said.

Weekend Must Reads

American Action Forum | Dodd-Frank Rulemaking Excluded From Regulatory Review

An effort to reduce red tape by financial regulators excludes one of the most burdensome financial laws in recent memory, the Dodd-Frank Act.

Fiscal Times | The Spectacular Too Big Failure of Dodd-Frank

If the point of Dodd-Frank was to eliminate TBTF, it’s clearly failed. Instead, what it has done is prove the point of conservatives, who have consistently argued that regulatory expansion disproportionately impacts smaller players in any market. If the point of Dodd-Frank was to help consumers, that too has been a failure. Consolidation reduces both choice and proximity for most consumers, and the data from Harvard amply demonstrates that in the wake of Dodd-Frank. Rather than provide more competition for service and price, consolidation has left borrowers more and more at the whims of fewer and fewer providers. About the only success we see from Dodd-Frank is the strengthening of lobbyists on Capitol Hill, particularly from Wall Street.

The Hill | Overregulation is endangering our credit unions

The mounting costs and growing complexity of credit unions’ compliance burden are driven by two key components of overregulation: regulators’ overestimation of risk and the need to regulate it, and their underestimation of the time it takes to comply with a rule that, in the end, confers little benefit. Unfortunately, the result has become abundantly apparent as more and more credit unions, not-for-profit, member-owned financial institutions, have ceased doing business. Since 2007, the number of credit unions has declined by 1,600. That’s a whopping 21 percent drop. Under these circumstances, it is no surprise credit unions and NAFCU believe “enough is enough” when it comes to overregulation.

    In the News

Wall Street Journal | HUD Secretary Defends Decision to Lower FHA Fees

American Banker | Republicans Hammer Castro Over FHA Premium Reduction

The Hill | Castro grilled over lowering mortgage insurance premiums

Bloomberg | Working on ‘Sustainable Housing Policy' A Priority for Republicans, Hensarling Says

Charlotte Observer | Pittenger: Regulations harming community banks the most

Financial Times | Regulations hit smaller US banks hardest

Washington Post | New study finds that Dodd-Frank has promoted industry consolidation and killed community banks

El Paso Inc. | Community banks lobby for relief

The Hill | Republican vows to address 'the unfinished work of welfare reform'

Investor's Business Daily | Economic Optimism Index Dives Among Middle Class: Poll

Investor's Business Daily | Studies Confirm Dodd-Frank Strangling Small Lenders

Real Clear Politics | The Truth About Obama's Job Record

Bloomberg |
Financial regulators should embrace cost-benefit analysis

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