Should the FHA take on more bad mortgage loans?
There’s an interesting debate going on now between members of Congress and the Federal Housing Administration. Congress has proposed legislation requiring the FHA to back up to $300 billion worth of risky mortgage loans. The commissioner of the FHA, Brian Montgomery, opposes this legislation, saying that taking on so many bad loans would hurt his agency.
Montgomery, speaking before the National Press Club, said that the FHA is not designed to handle high-risk mortgage loans. Instead, it is set up to work with safter, less risky loans.
I have to agree with Montgomery here. Forcing the FHA to take on so many bad loans is yet another too-little, too-late attempt by Congress to deal with the nation’s housing mess. If Congress really wanted to stop the bad loans, high number of foreclosures and falling real estate prices, they would have taken action earlier to stop mortgage lenders from relaxing their loan requirements so much. During the height of the housing boom, mortgage lenders were giving out mortgage loans every day to borrowers who clearly did not have the financial wherewithal to own a home.
Leaning on the FHA, an agency designed to help stabilize the economy, is not the way to tackle the housing crisis.
Tags: Brian Montgomery, Congress, FHA, housing crisisRelated Stories
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