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FHA: Reforms to Protect Taxpayers and Borrowers

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  • Sarah Rosen Wartell
  • Mark A. Willis

Abstract

The Federal Housing Administration (FHA) has historically played a crucial role in supporting the housing market. The most recent financial and housing market crises would have been far worse if the FHA had not stepped in to provide mortgage credit. Providing that credit, however, required FHA to take on elevated levels of risk. FHA supports the housing market and homeownership in three ways. First, FHA helps to ensure that all those who can sustain homeownership have access to reasonably priced long-term, fixed-rate mortgages. Second, FHA helps to prevent the collapse of local, regional, or national housing markets when the private sector pulls back from offering mortgages. Third, FHA can promote innovation by piloting new products and underwriting and servicing practices. As the country looks to reform the housing finance system, this recent experience makes clear how important it is to both retain FHA and strengthen its ability to assess and manage risk. Addressing these issues immediately would help to further reduce risks to the Fund, protecting taxpayers and borrowers while allowing FHA to continue to serve its core missions.

Suggested Citation

  • Sarah Rosen Wartell & Mark A. Willis, 2014. "FHA: Reforms to Protect Taxpayers and Borrowers," Housing Policy Debate, Taylor & Francis Journals, vol. 24(3), pages 651-662, July.
  • Handle: RePEc:taf:houspd:v:24:y:2014:i:3:p:651-662
    DOI: 10.1080/10511482.2013.866151
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