That could be the alternative title to the recent AEI Outlook on the Federal Housing Authority.
Key highlights:
- The FHA is leveraged 840 to 1 (which would mean it would have been already shut down by regulators if it were a private lender)
- The FHA uses accounting techniques similar to Enron to obscure the reality of their financial situation
- The FHA is no longer focused on low-income homeowners- “In FY 2011, 54 percent of the FHA’s dollar volume went to finance homes that were greater than 125 percent of an area’s median home price, up from 36 percent in 2010.”
- “[M]ore than 90 percent of all mortgages are acquired and securitized with a GSE guarantee or insured by the FHA or the Department of Veterans Affairs (VA) and securitized by Ginnie Mae with a government guarantee.”
- “The off-budget debt of various government agencies—the majority of which is GSE debt—is $7.5 trillion, all of which is ultimately the responsibility of the federal government.”
But the GSE model works, so they tell us…