Nov 16 - The American Bankers Association has released the following statement by Frank Keating, ABA president and CEO, regarding the Federal Housing Authority's projected loss of $16.3 billion in its recently released annual report.
“The Congressionally required independent audit of the Federal Housing Administration is a troubling if not surprising reminder of the importance of balancing prudent underwriting and down payment requirements with efforts to serve borrowers who may otherwise not be able to access credit.
“The erosion of the FHA's insurance fund does not come as a surprise. It is widely known that FHA, like much of the rest of the mortgage market, suffered from poor loan quality in the recent past. How FHA – and potentially policymakers in Congress – deal with the erosion will be of vital importance.
“FHA must be made sound and able to function without taxpayer subsidy. Achieving that goal must be done in a way that does not drive private lenders from participating in the FHA program by making the process overly bureaucratic and lacking in certainty. It also must balance the needs of borrower's with good credit but limited down payment resources with the needs of the program to impose more sound underwriting and down payment requirements.
“The task will not be easy, but is necessary not just to preserve FHA, but also the broader mortgage market. The ABA stands ready to engage and assist as the process moves forward.”