Economics, U.S. Economy

National Association of Realtors tries to present FHA myths as ‘facts’

Image Credit: Diana Parkhouse (Flickr) (CC BY 2.0)

Image Credit: Diana Parkhouse (Flickr) (CC BY 2.0)

The National Association of Realtors (NAR) is at it again. Not being satisfied with the FHA’s decades-long lending nightmare that resulted in an estimated 3.2 million dashed homeowner dreams since 1975, it is launching a new ad campaign entitled “FHA Facts”. Their “facts” are cold comfort to the half million working-class families getting loans from the FHA since 2008 who will lose their homes to foreclosure. These families will lose a sizable portion of their savings and see their credit ruined because the FHA set them up to fail.

The housing lobby says that “now” is a bad time for reform. They’ve said that for over 60 years. American families who face the crushing fact of foreclosure can’t afford to wait for the housing lobby to embrace common-sense changes to restore FHA’s vital mission of providing responsible credit to working class families and first-time home buyers.


Presents the following myths as:

FHA Fun Facts

FHA Fun Facts 2

No matter how hard the NAR tries to change the facts, this is not your great-grandmother’s FHA.

Fact: FHA’s so called safe lending since 2008 will result in a half million foreclosures (source: HUD documents).

Fact: FHA’s abusive lending practices are particularly harmful to working class families and neighborhoods (source:

Fact: Since 1975 an estimated 3.2 million FHA homeowners had their dreams turn to nightmares (source: HUD documents).

Fact: Today’s FHA’s lending standards are not “exactly the way Congress designed it to operate 80 years ago”. (sources: HUD documents, John P. Herzog and James S. Earley, Home Mortgage Delinquency and Foreclosure (Cambridge, MA: National Bureau of Economic Research, 1970), and Thomas N. Herzog, History of Mortgage Finance with an Emphasis on Mortgage Insurance, Society of Actuaries, 2009).

  • Maximum loan-to-value: 80% in 1934 vs. 96.5% today
  • Maximum loan term: 20 years in 1934 vs. 30 years today
  • Insurance claim incidence rate: 0.2% cumulative claim incidence rate from 1934-1954 (2.9 million loans) vs. 10.6% average annual claim incidence rate from 1975-2011 (30 million loans)
  • Insurance loss severity rate: 9% average from 1934-1954 vs. 63% in 2012
  • FHA loss rate (incidence x severity) has increased 400 times, having gone from a 0.02%(1934-1954) to 7% today

4 thoughts on “National Association of Realtors tries to present FHA myths as ‘facts’

  1. Why does a feee market need an FHA to begin with? If there is demand for something and it makes sense the market will provide it much more effectively than a government program. And if there isn’t the government should not have programs promoting it.

    • Because the government also heavily intercedes in the “private” lending market through capital controls. When they make these loans 10-100x less capital efficient to create, none of the tranditional sources of consumer credit will touch it over other alternatives.

  2. Only Ed Pinto, in his mendacity can quote a “fact” by referencing an AEI website:

    Fact: FHA’s abusive lending practices are particularly harmful to working class families and neighborhoods (source:

    It’s nice to know he agrees with any conclusions he draws. What a farce.

    • Ed’s facts are from an exhaustive study of hard data. It clearly demonstrates excessive FHA failure rates (wealth and neighborhood destruction) concentrated on working class families. That’s what’s on the AEI website. Glad to discuss facts but obtuse criticism of where the research posted is the opposite of a meaningful, fact-based discussion.

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