While Dr. Carson acknowledged that the FHA provides "a backstop" in the mortgage market, his exchange with Sen. Thom Tillis, a North Carolina Republican, that favored the far-right stance of abandoning the FHA in favor of private mortgage insurance was the most telling portion of the nominee's testimony. Dr. Carson's swift agreement with Senator Tillis' flawed and misleading rhetoric on the efficiency and availability of private mortgage insurance to replace FHA insurance products signals many worrisome (and blatantly wrong) sentiments surrounding the senator's and nominee's perfunctory understanding of the American housing and mortgage markets.
No one will argue that FHA's $1.2 trillion exposure to mortgage risk is vast. But the FHA portfolio, which includes single family homes, multifamily apartment complexes, hospitals and assisted-living facilities, provides unrivaled liquidity to each of these residential and commercial mortgage markets at a fraction of the cost and risk to the American taxpayer than any private mortgage insurance provider would be willing to offer. FHA's numerous layers of risk mitigation include stricter underwriting standards than private mortgage insurers, a widespread and more transparent dispersal of risk through Ginnie Mae securitization and larger capital holdings (with continuous annual growth) than any private insurance provider, to my knowledge.
Considering these factors, it not surprising that the FHA's default rate is currently at an all-time low. The FHA provides responsible, unrivaled insurance products for a variety of parties in the American real estate market that include homeowners, home builders, apartment developers, mortgage lenders and real estate investors. Not only do the FHA's mortgage insurance premiums produce a hefty return to the U.S. Treasury, but they create jobs for home builders, engineers, architects, property managers and numerous other disciplines related to the housing industry throughout the nation. Beyond its economic benefits, FHA programs also serve to moderate the overall price of housing throughout the country by making a 30-year fully-amortizing mortgage loan available to the largest percentage of a nation's citizens in the industrialized world.
Shifting the market share for mortgage insurance toward the private sector would make homeownership more expensive and less accessible for consumers in favor of making it more profitable for an historically duplicitous private industry. I'm sorry, Dr. Carson, but you can't have it both ways. You do not get to insist that you want to promote homeownership while also advocating a diminished role for the agency that remains the most robust and substantive factor in the single family housing market over the last century.
This issue alone indicates that Dr. Carson's qualifications for HUD secretary are questionable at best and laughable at worst. I urge all citizens to be wary of the Senator Tillis' and nominee Carson's disparagement of the FHA, as it is hardly a "centrist approach."