She said Thursday that lawmakers should learn from that experience and not unduly restrict FHA as they pass housing finance reform bills.
Speaking at a Zillow/Bipartisan Policy Center conference in Washington, the commissioner noted the FHA would have been hampered in playing its countercyclical role following the 2008 meltdown if Congress had not raised FHA’s loan limits.
“It took congressional action to raise the loan limits,” Galante said. There is no guarantee that Congress or the administration would do that the next time there is a crisis.
FHA needs this flexibility so it can serve its countercyclical role in times of crisis and assist underserved borrowers in more normal times.
She also stressed FHA needs more flexibility in managing more immediate risks to the FHA insurance fund.
“We need to quickly respond to changes in a volatile housing market that quite frankly are not always compatible with waiting for congressional or regulatory action,” Galante said.
In cases where FHA sees emerging risks and documents those risks to the single-family program, the agency should be able to take action through a mortgagee letter.
Congress recently gave FHA the authority to regulate the Home Equity Conversion Mortgage program via a mortgagee letter, which the agency can issue and implement quickly.
She said FHA incurred additional losses waiting for legislative changes to curb losses caused by the HECM program and the seller-funded downpayment assistance program in the 1990s.
“FHA would not have needed a $1.7 billon draw” from the U.S. Treasury, Galante said, “if it were not for those two programs.”