1Center for American Progress | To Early to Sound the FHA Alarm: The Stability in the U.S. Housing Market
Too Early to Sound the FHA Alarm
The Federal Housing Administration Is Financially Vulnerable but ItsFuture Depends Most on Stability in the U.S. Housing Market
By Sarah Wartell and John GriffithDecember 12, 2011
Te Federal Housing Adminisraion, or FHA—he governmen morgage insurer hahelps make homeownership aordable o rs-ime homebuyers and lower-incomeamilies—has so ar weahered arguably he wors housing crisis in hisory wihou ax-payer assisance. Tis is a remarkable achievemen a a ime when many oher morgage-invesed nancial insiuions needed governmen bailous.By playing a key counercyclical role, FHA prevened a more devasaing over-correcion inhe housing marke. Wihou FHA hundreds o housands and perhaps millions o home-owners migh no have had access o morgage credi in he wake o he nancial crisis, which would have urher chilled housing demand, depressed home prices, exacerbaed he GreaRecession o 2007-2009, and slowed our already epid economic recovery even more.Buconcern has arisenha FHA could soon run ou o money and require axpayersuppor or he rs ime in is 77-year hisory. While serious, hese concerns shouldno be overblown.Tis issue brie deails he nancial condiion and acuarial projecions or FHA’sMuual Morgage Insurance Fund, which backsops all o he agency’s single-amily housing programs, looking specically a conservaive calculaions ha are by any measure overblown when weighed agains more realisic projecions. We hen deail heools available o FHA o deal wih a more severe han expeced housing marke in hecoming years—ools ha could enable he agency o coninue is crucial role in he U.S.housing marke wihou cosing axpayers a dime.