FHA: What Record of Success?

Over its more than 80 years of existence, the Federal Housing Administration (FHA) has contributed to the long-run expansion in federal guaranteed mortgage debt in the U.S. financial system, increasing financial risk to both homeowners and taxpayers. Despite various reform initiatives since the 1930s, the FHA has consistently had trouble meeting safety and soundness guidelines, undermined the stability of the housing market, and in recent years required several billion dollars to cover losses. In return, the FHA’s mortgage insurance programs have had minimal impact on homeownership rates, suggesting that additional FHA reforms will, at best, provide merely temporary financial improvements to the agency, without appreciable benefits to the housing market. Therefore, we argue that the FHA has outlived its usefulness to taxpayers and homeowners. Congress should eliminate the FHA and get the government out of the home financing business.

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