Jeb Hensarling: “The legislation before us would increase taxpayer exposure to the housing market by raising conforming loan limits at…”

“The legislation before us would increase taxpayer exposure to the housing market by raising conforming loan limits at the Federal Housing Administration (FHA). Hardworking taxpayers, struggling to make their own mortgage payments, should not be forced to subsidize the purchase of $729,750 homes. Taxpayers have already spent almost $200 billion dollars bailing out the Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac--why should they also be forced to subsidize the purchase of costly homes for affluent borrowers through FHA? If the GSEs with their implicit guarantee were a problem, then expanding FHA with its explicit 100 percent taxpayer-backed guarantee is a larger problem. I fear that raising conforming loan limits at FHA while allowing the GSE limits to remain at current levels will push all new mortgage originations between $625,500 and $729,750 into full taxpayer backing through FHA. To make matters worse, FHA's present financial state is precarious. For the past two years, its single family Mutual Mortgage Insurance Fund (MMIF) has been undercapitalized. This fund, which is supposed to hold sufficient reserves against unexpected future losses on its existing insurance, is statutorily required to maintain a 2% capital cushion. As of FHA's most recent actuarial report, the Agency is currently 88% below their statutorily required minimum capital ratio.…”