Fannie Mae and Freddie Mac reportedly are receiving reimbursements from mortgage makers on bad mortgages the agencies bought that involved fraud.
But, “oddly, one large government player in mortgages, the Federal Housing Administration, has disclosed next to nothing about its reimbursements,” according to the Wall Street Journal’s Heard on the Street Column.
“And without such information, it is impossible to judge whether the FHA has taken proper steps to force mortgage makers, and not taxpayers, to bear the costs of faulty loans.”
The FHA stayed away from troubled mortgages during the real estate boom, because it required documentation and took on mostly standard fixed-rate loans. So it may not be entitled to major reimbursements, the Journal reports. The FHA is the primary source of mortgages for first-time homebuyers.
“However, starting in 2007, to support a collapsing housing market, the FHA started to back huge amounts of mortgages,” the report says.
There is a good chance that the 2007-08 loans involved faulty underwriting.
“The FHA says it is currently reviewing past loans but won't give an idea of how many underwriting breaches it has found,” The Journal says. “If taxpayers were stuck with dross, they deserve to know.”
As for Fannie and Freddie, they are likely to need still more government assistance, Edward DeMarco, acting director of the Federal Housing Finance Agency, recently told Congress.
Last week, the House approved a bill giving the FHA power to hike monthly premiums it charges to consumers.
Officials say the agency needs to do so to stabilize its finances, which have deteriorated because of the foreclosure crisis, the Associated Press reported.
The agency doesn't make loans, but offers insurance against default. Borrowers pay extra fees because FHA-backed loans require down payments of only 3.5 percent of the purchase price.
Under changes being considered by FHA officials, a borrower with a mortgage of $170,000 would pay an extra $42 a month. The fees would bring in $5.8 billion in new revenue for the agency next year.
"It's going to cost everybody a little more money," said David Stevens, the agency's commissioner. The agency, he said, "was never meant to be, nor should it be a bailout program. It should stand on its own two feet."
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