Senate Republicans plan to block the confirmation of Carol Galante to head the Federal Housing Administration until the Obama administration takes more forceful action to strengthen the government mortgage insurer – and issues a blueprint for dealing with Fannie Mae and Freddie Mac.
Sen. Jim DeMint, R-S.C., warned that FHA is in "serious trouble" and may require a bailout within a few years.
"We are very concerned about Ms. Galante's lack of vision to change the course of the FHA,” said Sen. Jim DeMint Tuesday morning just before the Senate Banking Committee voted on party-lines to send Galante's nomination to the full Senate.
"We need people with a sense of urgency about the need to turn things around and reduce our debt and avoid future bailouts," Sen. DeMint said.
Sen. Bob Corker., R-Tenn., met with Galante before the committee voted, noting that the acting FHA commissioner is "very open to insurance increases."
However, most of FHA's losses are coming from seasoned loans, Sen. Corker explained to committee members. FHA officials are not sure that raising premiums on new, profitable loans is "really the way to deal" with FHA's capital deficiencies, he added. The latest audit of FHA shows it has a 0.24% capital ratio on a $1.1 trillion portfolio of insured single-family loans.
The Tennessee senator said he might put a "hold" on Galante's confirmation by the full Senate until the Obama Administration comes up with a plan to address Fannie and Freddie, which have been in conservatorship since Sept. 2008.
"I am distressed, frustrated and embarrassed that we have not dealt with GSEs and housing policy as a committee," Sen. Corker said.
Sen. Richard Shelby, R-Ala. noted that an Office of Inspector General report shows that the Federal Housing Finance Agency does not have enough examiners to ensure proper oversight of the GSEs. "This is just one of many problems created by the GSEs' prolonged conservatorship," the ranking Republican on the Banking Committee said.
"The longer we wait to reform our housing finance system, the larger these problems will grow and the solutions will become more expensive for the taxpayer," Sen. Shelby said.
Galante has been serving as acting FHA commissioner since July. The former president of BRIDGE Corp., an affordable housing developer, came to Washington in 2009 to run the FHA multifamily program.
