Federal Housing Administration (FHA) Acting Commissioner Biniam Gebre reaffirmed his organization's commitment to America's middle class as well as the role of the Administration and defended the FHA's recent lowering of the mortgage insurance premiums in statement released Thursday.
Gebre's statement provides a preview of his upcoming appearance at the Five Star Government Forum on March 18 in Washington, D.C., where he will sit down for a one-on-one interview with Five Star Institute President and CEO Ed Delgado to discuss FHA's recent housing policy changes and the future of the organization.
Gebre, who has been the Acting Commissioner of FHA since the departure of Carol Galante in October, stressed that FHA has helped more than 40 million Americans become homeowners in the last 80 years, playing a "critical" role in the building up of the middle class in America.
"Since 1934, FHA has made a pact with the middle class," he said. "If you can responsibly afford to buy a home and make your mortgage payments on time, you have a home with FHA. This is a promise made during the Great Depression and even after all we’ve been through recently, it holds true today."
A contentious issue among political parties has been FHA's capital reserve ratio, which was reported at 0.41 percent in November – less than one quarter of the required level of 2 percent. Gebre pointed out in his statement that FHA has grown by $21 billion in the last two years and is back in the black after the losses the Administration suffered during the economic downturn, "working to restore its reserves so that it can continue to do what Franklin Roosevelt envisioned more than 80 years ago: facilitate the responsible homeownership for middle class families."
One housing policy change Gebre discussed in his statement was the recent lowering of the FHA's mortgage insurance premiums by 50 basis points, down to 0.85 percent – still 50 percent higher than pre-crisis levels, according to Gebre. He pointed out that during 2010 and 2014, in the years immediately following the housing bust, FHA increased the premiums by a total of 145 percent in order to put FHA's insurance fund "back on firm financial footing" but had the unintended consequence of preventing qualified families and individuals from purchasing homes. The Administration estimates that the reduction in premiums will allow nearly a quarter of a million Americans to purchase their first home in the next three years.
The reduction in FHA's mortgage insurance premiums has not been without its critics. Those opposed to the lowering of the premiums say it cuts off revenue needed to return FHA to its required capital reserve ratio of 2 percent and that the move is a return to same type of "subprime" lending that led to the mortgage meltdown back in 2008.
"This reduction doesn’t change who qualifies for an FHA loan; it only changes the price someone pays for an FHA loan," Gebre said. "Let me be clear – FHA has never, is not, and will never engage in the sorts of lending practices that triggered the housing crisis. Unless one is trying to make a distinction, using the words ‘subprime’ and ‘FHA’ in the same sentence is not factual. The borrowers that FHA serves are not subprime. They are in fact the prime example of families pursuing the American dream."