Capito on Need for Oversight of FHA Lenders

Statement

Capito on Need for Oversight of FHA Lenders

Opening Statement at Financial Services Committee Hearing

Rep. Shelley Moore Capito (R-WV), the ranking Republican member of the House Financial Services Subcommittee on Housing and Community Opportunity, made the following opening statement at today's Financial Services Committee hearing focusing on oversight of Federal Housing Administration-approved lenders:

"Mr. Chairman, I would like to thank you for calling this meeting today. Like many of my colleagues, I was alarmed by reports last month that some of the lenders that caused the subprime problems of the last few years are now focusing their efforts on encouraging risky borrowers to utilize the Federal Housing Administration for mortgage insurance.

"Just two years ago, FHA had been essentially marginalized as a tool for first time homebuyers lacking the resources to make a significant down-payment on a home. The prevalence of sub-prime mortgage tools replaced what was a stable product in FHA with the instability of negative amortization, adjustable rates, and no doc loans among other products. By 2006, FHA's presence in the mortgage market had been reduced to 2 percent.

"Since this Congress passed modernizing legislation and the economic downturn, FHA has resumed its role as a viable option for first time homebuyers and now for those seeking to re-finance into a fixed rate mortgage. In 2008, FHA accounted for 26 percent of the mortgage market, a level not seen since 1970. This extremely rapid growth in market share does expose FHA to fraud and I am concerned that FHA may not have the personnel levels or the technological capabilities to keep up with fraudulent lenders.

"Part of preventing fraudulent lenders from gaming the system is to create a national registry for mortgage originators so that those acting illegally or unethically will not be able to move from state to state. This system will help immensely; however, if FHA does not have the necessary resources to keep track of the database and integrate it with their system, information will not be utilized effectively. From previous testimony from HUD witnesses, it is apparent that the entire department suffers from technological deficiencies.

"I look forward to hearing from our witnesses today about the allegations raised in news reports as well as learning about the progress and remaining challenges in ensuring FHA's viability for the future. I would like to thank the Chairman for holding this meeting and thank our witnesses for their cooperation."

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