(Read more: Mortgage alert: Borrowers change how they cheat)

“It is estimated that the improvement in recovery rates alone is worth more than $5 billion to the MMIF—which would far exceed the amount of the mandatory appropriation,” wrote Galante.

The FHA, which insures low down-payment loans, or loans with a minimum 3.5 percent down, stepped in to save the housing market. It went from about a 3 percent share of the market to almost a third of the mortgage market during the crash. But now, it’s paying the price.

“Over the years, the FHA has strayed far from its original mission. It has become the nation’s largest subprime lender,” wrote Rep. Jeb Hensarling, R-Texas, chairman of the House Financial Services Committee.

(Read more: Map: Tracking the recovery)

Most of the FHA losses, around $70 billion, were from loans originated between 2007 and 2009. The biggest trouble has been in reverse-mortgages for senior citizens and seller-funded down payments; the latter was banned in 2008.

—By CNBC’s Diana Olick. Follow her on Twitter @Diana_Olick.

Questions?Comments? facebook.com/DianaOlickCNBC

Article source: http://www.cnbc.com/id/101068629

As expected, the fight over the fate of Fannie Mae and Freddie Mac is now heating up on Capitol Hill.

Later today House Republicans are expected to introduce a bill from GOP Conference Chairman Jeb Hensarling that would wind down the two government sponsored entities in five years.

Hensarling and other Republicans not that the Congressional Budget Office has estimated the GSE’s will cost taxpayers $389 billion over ten years.

They’ve already inhaled $150 billion in taxpayer dollars.

The bill, backed by House Financial Services Committee Chairman Spencer Bachus, is similar to bills introduced in 2008 and 210; the difference now of course is the new House Republican majority.

Aides familiar with the bill say it would put an end date to the GSE’s conservatorship two years from the date of enactment.

It would repeal the GSE’s affordable housing goals mandate, shrink their size by capping the maximum portfolio size at $700 billion and then gradually reduce to $250 billion over five years. It would also return the conforming loan limit to $417,000.

That last one is particularly important to think about as we struggle through this Spring market and try to call it a “recovery.” Credit is still one of the biggest barriers to recovery today, and the private market for jumbo loans is thin at best.

I want to share some insight from FBR’s Paul Miller:

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Article source: http://www.cnbc.com/id/42132670?__source=RSS*blog*&par=RSS

After decades and decades of the ownership society, and all the trouble it exacted on our economy, the Obama administration is and has been pushing the premise that, “Our goal is not for every American to become a homeowner.”

That latest pronouncement comes from prepared testimony of Treasury Secretary Timothy Geithner before the House Financial Services Committee this morning.

In a hearing about the future of housing finance, i.e. the wind down of Fannie Mae and Freddie Mac, Geithner re-outlined the plan to take government out of housing. Part of that plan includes providing more government assistance for rental housing.

The home ownership rate has fallen precipitously since the housing crash began, from over 69 percent in 2004 to now 66.5 percent. The bulk of that loss comes from low and middle income Americans who lost their homes to foreclosure and from younger Americans who can no longer qualify for a mortgage, thereby dropping out of the household formation equation.

It makes sense that an administration governing during the worst housing crash in memory would take a policy shift, especially given that, as Secretary Geithner told the House panel, “We did not do a good job in helping low income Americans get access to sustainable housing finance options; we left them with a system where it was easy for them to be taken advantage of.”

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Article source: http://www.cnbc.com/id/41851303?__source=RSS*blog*&par=RSS