Document Type

Article

Publication Date

5-31-2016

Keywords

Federal Housing Administration, mortgage insurance, private mortgage insurance, PMI, guaranteed mortgage, housing finance, mortgage market, home ownership, Veterans Administration, affordable housing

Disciplines

Banking and Finance Law | Housing Law | Property Law and Real Estate

Abstract

This short article argues that the Federal Housing Administration has suffered as a result of many of the same unrealistic underwriting assumptions that led to problems for many lenders during the 2000s. It, too, was harmed by a housing market as bad as any since the Great Depression. As a result, the federal government announced in 2013 that the FHA would require the first bailout in the agency’s history. While facing financial challenges, the FHA has also come under attack for the poor execution of policies designed to expand homeownership opportunities.

Leading commentators have called for the federal government to stop having the FHA do anything but provide liquidity to the low end of the mortgage market. These critics rely on a few examples of agency programs that were clearly failures, but they do not address the FHA’s long history of undertaking comparable initiatives. In fact, the FHA has a history of successfully undertaking new homeownership programs. However, it also has operational flaws that should be addressed before it undertakes similar future homeownership initiatives.

Comments

This article predates the author's affiliation with Cornell Law School.

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