Re “The FHA: A home wrecker,” Opinion, Dec. 27
Edward J. Pinto, the former Fannie Mae official, fails to understand the legitimate purpose of the FHA.
Low- and moderate-income families are financially stretched. They have higher default rates and higher failure rates.
This is expected. It is the price for assisting marginal borrowers.
The benefit is to those who otherwise were excluded from the process. We all benefit when they succeed.
Pinto charges that the FHA's “house is not in order.” He calculates it has negative net worth. The same can be said of any federal agency. One man's losses are another man's investments.
Lastly, private insurance will certainly price
the higher risks with yet higher premiums and fees. This is the exact market force that the FHA is
mitigating. Viva la FHA.
I'm always amazed at the convenient short-term memory loss that seems to prevail among the Wall Street crowd and folks like Pinto. During the housing boom, FHA originations become almost nonexistent. FHA loans were shunned, as they required too much documentation and effort.
Pinto speaks of the need for proper risk assessment. If that had taken place at banks and other lending institutions, we would not be in the situation we are in today. The driving force behind the foreclosure numbers that Pinto discusses in his survey are because the FHA became the lender of last resort during the years right after the housing bubble.
The FHA program does need to be refocused on the original goal targeting first-time buyers. However, to demonize it for the sins of Wall Street is irresponsible and intellectually disingenuous.
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