Secretary Donovan Questioned By Senate Banking Committee

Earlier this month Secretary Donovan was questioned by the Senate Banking Committee on the financial health of the FHA Mortgage Insurance Fund.  A report released in November showed the agency was in the red $16.3 Billion dollars and it appears will need a bailout..

When Donovan was questioned, he could not promise FHA would not need a bailout but rather said we'll know more when the President's budget is released...

So in others words..like I said in my previous post HERE FHA is in deep doo doo..

Donovan however cautioned the committee not to make too drastic of changes to how the fund insures mortgage's as to not stall the recovery. "We are seeing a recovery, but it is still fragile," Donovan told the Senate Banking Committee. "We don’t want to hurt the market and in turn the FHA fund by going too far and stopping that recovery."

The agency's capital reserve account has dropped significantly since 2006 to -1.44% ending fiscal year 2012.  Under law the ratio needs to stay at 2%.  If that's not insolvency folks, I don't know what is... and clearly I don't know anything..

Sen. Richard Shelby (R-Ala.). "It is time for serious reform of the FHA before it needs a taxpayer bailout, if it isn’t too late already."

What types of changes need to be made? "A determination would not be made until the end of the 2013 fiscal year", Donovan said.

Haha...that means kicking the can down the road a bit and worrying about it later.  This seems to be the answer to all the issues we face is...let's just kick it down the road a bit and "see what happens".

Donovan said Congress could help the FHA by making some changes that the agency is unable to do on its own such as lowering max loan amounts (which Donovan is in favor of) as he noted, loan limits were reduced for Fannie and Freddie but not FHA which is putting more pressure on the fund in higher costs areas. 

What's interesting is nobody really thinks there is a problem but Wharton School of Finance Real Estate Professor Joseph Gyourko, thinks otherwise... "FHA is currently leveraged 41-to-1 -- which is higher than either Lehman Brothers (31-to-1) or Bear Stearns (38-to-1) when they collapsed"

Not to mention FHA is backing a proposal from the President to have Congress open up the Streamline Refinance to borrowers with non GSE and FHA mortgages and allow them to refinance into FHA insurance.. The min credit score? 580..

So not only is the fund in trouble but we're planning on expanding the refinance program that will further deplete funds, open up to more riskier borrowers, and then what? None of it makes any sense it will only  allow the banks to make even more money hand over fist which is what they've done since this whole thing began..

Yes - we've had a lot of banks collapse but those were competitors to the big mega banks and is the same thing that happened in the 1907 Panic; thousands of bank failures occurred but all that really happened was consolidation into bigger banks.   At that time private capital was taking profits away from the banks so something had to be done about so a widespread panic was induced which eventually led to the passing of the Federal Reserve Act (further consolidating power into the hands of the mega banks in New York) just a short 7 years later..

The name of the game is power folks..We as consumers pay more to keep FHA afloat so banks can continue to make money hand over fist.  They are purging the system of all its life until nothing is left bankrupting it all.

Just keep that in mind..

You want real truth..visit here.. Stop living in the matrix..

D...out..