•FHA-Backed Lending Is `Train Wreck' That May Trigger Crisis, Toll CEO Says

Discussion in 'Economics' started by ByLoSellHi, Nov 18, 2009.

  1. •FHA-Backed Lending Is `Train Wreck' That May Trigger Crisis, Toll CEO Says


    FHA-Backed Lending Is a ‘Train Wreck,’ Toll Brothers Chief Says
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    By John Gittelsohn

    Nov. 18 (Bloomberg) -- The Federal Housing Authority, which insures home purchases with as little as 3.5 percent down payments, may create another crisis in the lending industry, said Robert Toll, chief executive officer of Toll Brothers Inc.

    “Yesterday’s subprime is today’s FHA,” Toll, whose Horsham, Pennsylvania-based company is the largest builder of luxury homes in the U.S., said today at a New York conference for builders sponsored by UBS AG. “It’s a definite train wreck and the flag will go up in the next couple of months: Bail us out. Give us more money.”

    The FHA’s losses are greater than the agency can withstand, Edward Pinto, a former chief credit officer with government- backed mortgage lender Fannie Mae, said in testimony before Congress in October. The FHA said 456,000 of its loans, or 8.2 percent, were in default as of September. That was up from 5.6 percent in September 2008.

    The default rate for loans tracked by the Mortgage Bankers Association was a record 9.24 percent for the three months through June, the most recent period for which data is available. That was up from 6.41 percent a year earlier.

    To contact the reporter on this story: John Gittelsohn in New York at johngitt@bloomberg.net.
    Last Updated: November 18, 2009 12:55 EST