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Fact Sheet: The Federal Housing Administration’s 2012 Actuarial Report

Fact Sheet: The Federal Housing Administration’s 2012 Actuarial Report

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Seven key facts about the report and what you need to know about the agency's future.
Seven key facts about the report and what you need to know about the agency's future.

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Published by: Center for American Progress on Nov 19, 2012
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1Center or American Progress |  The Federal Housing Administration’s 2012 Actuarial Report
 The Federal Housing Administration’s 2012 Actuarial Report
John Griffith November 19, 2012
Te Federal Housing Adminisraion’s acuarial repor or scal year 2012 projecs ha he governmen-run morgage insurer could soonrequire axpayer suppor or he rs ime in is 78-year hisory. According o he repor, he agency’s primary insurance und has a
“economic value” o $16.3 billion, meaning i does no have enough money o cover all expeced claims
over the next 30 years
Here are seven key poins o consider:
The Federal Housing Administration is not running out of cash anytime soon.
Te agency sill has $30.4 billion in is coers osetle insurance claims as hey come in. Bu according o ederal budge rules, he agency mus hold enough capial o cover all expecedclaims over he nex 30 years, which would require abou $46.7 billion according o is acuaries. Ta leaves a long-run shorall o $16.3 billion.
This report does not mean the Federal Housing Administration will definitely require taxpayer support.
Te acuarialrepor is mean o help he agency wih is annual budgeing process. I will be monhs beore we know wheher he Federal Housing Adminisraion will require suppor rom axpayers and how much ha suppor will cos. In he meanime, he agency is expeced ogenerae $11 billion in revenues hrough he remainder o he scal year, which will help shore up he capial reserve.
If the Federal Housing Administration does require support, taxpayers would be getting a bargain.
 Wihou he agency’shelp in recen years, i would have been much more dicul or middle-class amilies o access morgage credi since he housing crisis began. According o Moody’s Analyics, he agency’s acions prevened home consrucion rom plummeing 60 percen rom alreaddepressed levels and home prices rom dropping an addiional 25 percen. Tis would have sen our economy ino a double-dip reces-sion, cosing 3 million jobs and hal a rillion dollars in economic oupu.
The Federal Housing Administration’s current financial troubles are the result of a prolonged foreclosure crisis and a fewpoor policy decisions.
Te bulk o he agency’s losses come rom loans originaed beween 2007 and early 2009. A large percenage o hose loans included so-called “seller-nanced down paymen assisance,” where sellers covered he required down paymen a he ime o purchase, bu oen raudulenly infaed he purchase price o make he ransacion worhwhile. I he agency had never allowed seller-nanced loans in is insurance programs i could have avoided more han $15 billion in losses and would no need axpayer suppor oday.
The Federal Housing Administration’s basic business model of sustainable low-down-payment lending is still profitable.
Te agency’s more recen years o business, roughly 70 percen o which had down paymens o less han 5 percen,
are likely o besome o is mos proable ever due in par o higher ees and new proecions pu in place by he Obama adminisraion.
If the Federal Housing Administration does need to draw money from the U.S. Treasury, it would not be a “bailout.”
 According o he budge rules governing all ederal credi programs, i he agency does no have enough money o cover all expeced claimsover he nex 30 years, he U.S. reasury auomaically lls he gap—here would be no need or Congress o ac.
Te chance o ha sup-por has always been par o he agreemen axpayers made wih he Federal Housing Adminisraion, daing back o he 1930s.
It’s actually quite remarkable that the agency made it this far without support.
In he wake o he crisis, mos privae mor-gage insurers have eiher gone ou o business
or signicanly scaled back heir insurance aciviy,
while he Federal Housing Adminisraion increased is business.
So he agency has acually ouperormed is counerpars in he privae secor.
 John Grifth is a Policy Analyst with the Economic Policy team at the Center or American Progress.

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