During a hearing to examine the financial status of the Federal Housing Administration and its Mutual Mortgage Insurance Fund (MMIF), majority members of the House Financial Services Committee had harsh words for Department of Housing and Urban Development (HUD) Secretary Julian Castro, calling the FHA’s lending practices “subprime lending,” “dumb regulation,” and “predatory lending.” At times, the Congressmen seemed to lose sight of the hearing's purpose, straying off topic to take the FHA to task.
In his opening statement, Committee Chairman Rep. Jeb Hensarling (R-Texas) criticized the FHA’s eligibility requirements, categorizing the FHA’s lending practices as subprime lending. Hensarling blamed the financial crisis on “dumb regulation” and “helping to put people into homes they could not afford to keep.” Here's an excerpt from his statement:
"Now with respect to subprime lending, what consenting adults do with their money is their business. But what FHA does with taxpayer money is our business. Do we really want the federal government to be leading the charge into subprime lending? We’ve all heard from our constituents. I heard from a gentleman, Walter, from Mesquite: 'I am one of those that got a house I never should have gotten. I could not afford to buy a home but no one told me that. Now I’m behind and underwater on a house I never should have bought.' Again, the administration should not be leading the way, putting people like Walter into homes they cannot afford to keep."
Representative Scott Tipton (R-Colo) echoed Hensarling’s statements, calling the FHA's $625,500 loan limit "ludicrous." Representative Bill Huizenga (R-Mich) added that “it’s hard to argue that that’s low and moderate income.”
Not to be outdone, Rep. Scott Garrett (R-NJ) accused the FHA of using predatory lending strategies, such as low down payments, low credit scores, inadequate upfront pricing, and high maximum dollar value loan limits. Garrett, however, also stated that the FHA’s allegedly predatory lending practices “would be ok if, at the end of the day, the results were positive.”
Not to be outdone, Rep. Scott Garrett (R-NJ) accused the FHA of using predatory lending strategies, such as low down payments, low credit scores, inadequate upfront pricing, and high maximum dollar value loan limits. Garrett, however, also stated that the FHA’s allegedly predatory lending practices “would be ok if, at the end of the day, the results were positive.”
Following the hearing’s announcement, Ranking Committee Member Rep. Maxine Waters (D-Calif) also questioned the intent of the hearing, calling it “merely a smokescreen to allow Republicans to cut or freeze spending that invests in our vulnerable citizens, and turn programs into block grants so that states can engage in a ‘race-to-the-bottom.’”
For more information about the hearing and Castro's response, subscribe to the Banking and Finance Law Daily.
