Attached below is a recent House testimony from Ed Pinto (Fannie Mae's chief credit officer back in the 80s) pointing to a potential funding gap at the Federal Housing Administration (FHA). FHA is the government agency that (among other things) provides mortgage insurance to the lenders for home buyers who do not have sufficient downpayment. In some ways the agency also helped contribute to the housing bubble by helping homeowners leverage their home beyond what would be considered prudent.
Ed Pinto Testimony
Mr. Pinto's testimony points to a potential gap between the claims liabilities on insured mortgages and the Mutual Mortgage Insurance Fund set up to cover these liabilities. The chart below shows the historical levels (in billions of the fund) and if one was to believe Mr. Pinto, the fund will be significantly in the red in the near future.
That means a potential rescue from the tax payer (in addition to the continuous bleeding of the GSEs and the FDIC). Mr. Pinto's estimate of the rescue required is between $40 and $60. As a general comment, it is unsettling to see the current administration focusing on numerous other issues without at least an attempt to address this situation.
