the fha is indeed broke. it is officially bailout broke. 29 days ago fha became the recipient of the latest washington bailout, funded courtesy of hard-working taxpayers to the tune of $1.7 billion. on february 13th when our witness, commissioner galante came before us to discuss the state of fha single family insurance fund she testified that fha was making changes to quote, accelerate the fund's recovery. regretly, seeming the fha accelerated national bankruptcy by act tell rating the national debt clock, seen on monitors both to my left around my right. when commissioner galante last stood before us the national debt was 16.5 trillion. mere eight months later the national debt stand at a staggering 17.3 trillion and counting. over $140,000 per american household on average. 1.7 billion of that is courtesy of the fha bailout. our spending-driven national debt is the greatest extensional threat facing our nation today. the former chairman of the joint chiefs of staff has said that the greatest threat to our n

the question is what fha won't do the same? >> so, -- spent why would you say without a doubt that fha will not be used to refinance these seize the mortgages? >> so again, to be clear we have made our statement which is we will look at and see how these programs point out, whether or if there is necessity for us to issue any -- >> fha refinance up on the screen there is clearly part of the program. that's what's in circulation. and getting back to an earlier point, because some of us were concerned about overleveraged as we get back to the issue of the implosion of the economy brought on by overleveraged, one of those issues was the role that congress played. and yes, the role that was played by this committee and on the senate side and allowing the overleveraging, 100 to one by fannie mae and freddie mac. and when legislation was brought by me and others to the floor to try to allow the radio toward committee to control it, it was supposed by that side of the aisle. so there's a little bit of revisionist history going on. >> t

the fha is a government agency. and freddie are still technically private companies that were taken over by the government in 2008 through a legal process known as conservative ship. they have a government conservator am a little bit like a receiver standing over them. to government has war and acquire up to 80% of shares. the government is kind of the majority owner. they are a little bit different situation between fannie mae and freddie mac. i know folks that have been in the mortgage industry during this whole six years that the bubble burst. fha has been the savior of the whole thing because of the fact that you could not get a mortgage anywhere. no one with gary and teeing, banks could not buy them. one was guaranteeing them. so fha has actually been the only bright light in any of the housing market. any mortgage broker if they could still sell a mortgage, that is who they put it into. on the fannie mae and freddie the what ever happened to lawsuits where those guys were making an ungodly amount of money wher

fha. they play a vital role. the problem is and is not on sound financial footing and that jeopardizes its ability to provide this first-time home buyer or low income financing. you are going to hear today is that fha is not broke. that is not the case. have a negative capital ratio for the they're supposed to have 2%. 4%.many have to have they have a negative net worth of 60 point $3 billion. you're going to give they have $48 billion in the bank. -- $60.3 billion. they do not have enough to cover all of their liabilities. we need to pass the past act. it make sure we have a strong fha for the future. so it can help these families and make sure that taxpayers do not have to underwrite these mortgages into the future and put them on sound footing. it gets in the fha back to its original core mission. we haveportant that this discussion. we need to know exactly where fha is because i do not think anybody knows. us things were fine and getting better. we have people telling us the same thing about freddie and fannie th

i think it helped a lot and finds about the fha. here, to coinmes a verb, complex of five -- comp lexify things. eight,stand that on page transfer says that the was triggered are required almost entirely as a result of the performance in the program? >> that is correct. true that the accounting transfer of $1.7 billion was calculated based on ofa prior to the enactment the reverse mortgage reform stabilization act and its implementation? is a little more difficult because i would just the 1.7 -- there is an element of the receipts that are low but alas, as it was soon to an earlier question. >> the implementation of the reverse mortgage stabilization reform act, i am getting the title all screwed up. but think you know what i'm referring to. >> just to be fair, the next time you will see numbers like this is when the president does the re-estimate that will be in february or so of next year. >> and to what degree will that reflect any experience for implementation? >> it will reflect the projections of what the future experience will

mel watt, to be head of the fha, let me tell you what folks say around here. there are prominent donors on the republican side who believe that the federal government should not play a role in housing. so they blocked mel watt from being the head of the fha to appease those donors. even though they would never even introduce a bill to repeal the fha or repeal the federal housing, because the real estate industry and home builders would go berserk. so if they can't get what they want because they can't repeal a law, they can't beat it in court, they can't win at the ballot box to get enough people in congress to repeal a law, they will defund or decapitate or try to shut government down. the senate rules can't be used to nullify american law. that's why what we did today was so very important. and you know, chris, it's going to have one other benefit. we waste so much time on the procedural maneuverings about appointments. by shortening that now, there will be more time to actually debate and consider the other most important job of congress, which is legislatio

we still have fannie and freddie, the fha, you know, insure close to 90% of residential mortgages. that means the government is basically setting the price of those. and that's issues -- we have problems in the shadow banking market. even more importantly than that, we have to get our economy growing again. and we have to get them growing. the only way you can do that, is with real honest to goodness structure reform. it may be very necessary to raise the rates on higher earners, that will be much more powerful and effective if it's done as part of reform. we need immigration reform. we need tax reform. there's so much we need to get done to restore our competitiveness. i look at -- i -- something that austan goolsbee said that resinated with me. when you look at what's the potential for our economy, it's still, i think, quite high. but i do believe we're not wanting to repeat the bubble years. and i think when you look at the bubble, between '97 and 2007, the bubble years, median family income was absolutely flat. americans were double their borrowing, borrowing more than they coul

but experts say demand depleted the fha's reserves, forced higher costs. ers, who say they can offer a better deal. >>> we are learning new details about the extreme abuse suffering by one of ariel castro's kidnap victims. michelle knight, the first of three young women to be ab ducked in cleveland, describes in a paid interview with dr. phil what it was like to endure nearly 11 years of horror. 11 years of being chained in castro's home. take a look. >> when you were down there, was it generally in the dark? >> there was no light. no light at all. >> and you just laid on the concrete floor in the dark? >> well, it was kind of like being like this because i couldn't lay down because the pole would hold me up. >> because of the chain around your neck. >> yeah. >> you were able to sleep some? >> no, i just mainly passed out from the chain being around my neck. >> castro was sentenced to life in prison but was found dead in his cell in september and later tonight on "ac 360," anderson cooper sits down once again with dr. phil to talk about what else he discove

we talked about the fha -- >> should have never done this. >> the wage works and the whole situation.'s not wage works that keeps the money. your mroer gets to keep the money. >> traditionally, they use that money to pay wakeworks for the administration fees. >> is that how is works? >> yes. my understanding is you can use the money for three things. donate the money to charity. they can split it up among the workers who participated in the health plan or they can use it to jau set the cost of administering the program. >> so basically that's how you pay them. >> and that's how you pay them. >> they can't give them back to the employees because that would invalidate the fund's tax exemption status. but it's still ridiculous when you have to prove to them how you're using the mope. a receipt should be enough. you shouldn't have to have an itemized receipt and a note from your doctor on top of it and triplicate copies of everything. >> i'm still on the you must turn that off. the pilots, it can influence the readings in the come pit. oh, never mind. never mind. no, it's okay. >> i agree

. >> jpm, the estimates that i have seen that bank of america will be around $6 billion on fha. >> the issue is all these cases are much different, so extrapolating from one to the other -- by the way, because we have settled on a lot of them and we know what we did versus what we think other people did. it is hard to speculate. >> so it is reasonable to assume the total cost will be up to $50 billion overall. >> the majority in the mid-40 billions. >> most of that was related to countrywide? >> yeah, but everybody, all the pieces -- even like last year third quarter we settle the case around the merrill lynch transaction -- we settled a case around the merrill lynch transaction. this year there are other things in there. the biggest part of it is mortgage related, mortgage related activities that took place in the mid-2000's. we settled some discrimination suits hanging around for years and things like that, so there have been other things. >> you paid what for countrywide, $2.5 billion? >> that was -- >> is that one of the most memorable acquisitions of all time, could we put it that

>> we had for years after the financial crisis we had big gulf, 3.5% down for fha down or 20% down. was virtually no middle ground. what you're seeing now thatome prices are on the up swing they're filling middle ground where there are lower down payment options, 15, 10, 5% down. not as long as home prices are rising. rising home price gives the lender additional problem of safety. if the home standards get loopier and loop ier that is what happened last time. melissa: feels like that is the direction we're going in. why would we not see that it is coming to that? >> we'll see. that is the test. as higher the prices go if we start to see standards get leaser around looser i will be first one on the show to say look, there is a problem. we're seeing something frankly i expected for past couple years. that is once home prices bottomed and start to move the other way. now lenders or investors, government gurantors whoever is on the hook start to feel more comfortable. melissa: you say who is on the hook, bank of america, wells fargo, they are out with 5% down. the reason why with they'r

the world. liz: and you think that's in part because of fannie mae and freddie mac helping people buy homes? >> it's not just fannie mae and ginnie maes and fha, you'd have to put that in also -- liz: sure. >> it's that the government is willing to provide kind of an indirect subsidy. when the united states government wants to borrow, for 30 years they have to give you call protection. when an individual with a fico score of under 600 wants to go to borrow, with support they don't have to provide any call protection. and so the structure has induced people to believe that the way to accumulate wealth is to buy a house. now, if you look over a long period of time, the price of a omahas gone up 50% of the time and gone down 50% of the time. we're here at the cme conference where they've reduced transaction costs and hedging to less than one-tenth of 1%. but if you want to sell your house, it could cost you 10% between the brokage commissions, fixing it up, etc. so unfortunately today, period yang net worth in america is around 45,000. it's about 20% below greece. liz: that's crazy, i mean, 20% below greece, but what is the answer? by simply mak

. >> the counseling thing is just a small amount of people within some loans within fha. fha has not set their limit on what their back end ratio is. we'll see people going into five-year a.r.m. to help qualify. mortgages won't be as bad as it seems. the 43% back end ratio for qm. the private money is going to be in non-qm mortgages, nonqualified mortgages where you can go higher than 43%. yes, slightly higher interest rates but you're going to get more people into houses because of. it's all going to equate out. people buy because they have a job and they want to plant roots. let's talk the job market. if you think the job market -- >> the job market is under pressure. >> it's not -- >> it's under -- >> we're in an absolute plateau. >> no, no, fred, let's talk about those roots. you have people, they actually go out and purchase a home right now, they're stuck in the home. if you want to buy a home, plan on dying in the home. because here's the thing, you'll never sell it. if you're stuck in that house, you have to only assume you're never going to be able to get out of

jpm, the estimates that i have seen that bank of america will be around $6 billion on fha. issue is all these cases are much different, so extrapolating from one to the other -- by the way, because we have settled on a lot of them and we know what we did versus what we think other people did. it is hard to speculate. >> so it is reasonable to assume the total cost will be up to $50 billion overall. >> the majority in the mid-40 billions. >> most of that was related to countrywide? all the but everybody, pieces -- even like last year third quarter we settle the case around the merrill lynch transaction -- we settled a case around the merrill lynch transaction. this year there are other things in there. the biggest part of it is mortgage related, mortgage related activities that took place in the mid-2000's. we settled some discrimination suits hanging around for years and things like that, so there have been other things. what forid countrywide, $2.5 billion? >> that was -- >> is that one of the most memorable acquisitions of all time, could we put it that way? >> i am not su

the. i would just repeat my earlier point, if are going to support homeownership, doing it to fha, people low down payments that's fine as long as there's counseling and you've got steady passage of making regular payments, that can show you that people are ready for the next step. you don't give them any favors by giving them a mortgage and home they don't understand, they can't afford, they can't handle. they would eventually is that house with a lot of heartache and it's not the direction we want to give. >> again in this theme of the great divide, one of the biggest, we talked about this in the poll was attitudes towards credit. again, this top third basically again use credit as a very positive force that is allowing them to in effect barred from the for future earnings and two more now. below that still enormous doubt about the entire system of debt and whether it leads, creates more of a risk than opportunities. you had a remarkable extent she wrote about with a credit card. talk about that and what may be the broader lesson that is for policy and the public. >> first of all, i und

point homeownership doing if you're fha and low down payment is fine as long as there's counseling and you have past histories of making utility payments that can show you the people are ready for the next step. you don't do them any favors by giving them a mortgage and home that they don't understand that they can afford and they will eventually lose the house with a lot of heartache for them and their families. it's not the best way to go-go. >> youness theme of the great divide one of the biggest diversions is in the poll was attitudes toward credit. basically using credit is a positive force in her life allowing them to in effect are all from their future. below that still enormous doubt about the entire system is dead and whether it leads them to create a risk an opportunity in their lives. .. >> there was a $2 charge, and so, okay, that would have been fine except the next bill came, and it was a $10 late fee on the $2 charge. i ignored it, called customer service, correct it, let it go, and it -- later, my husband and i were applying for a construction loan for property we just bought, they pulled my credit report, which i don't check, and they whack

doing it through fha and even with low debt payments is fine, as long as there's counseling and history of making regular utility payments were what can show you that people are ready for theep. you don't do them any favors by giving them a mortgage and home that they don't understand they can afford, can't handle. it's a lot of heart ache for them and their families and it's not the direction where want to go. >> again, in the theme of the great divide, one of the biggest emergencies we've talked about his attitudes for credit. again, use credit as a positive force, allowing them to in effect borrow for future earnings in newmar now. low that still enormous doubt about really the entire system of debt and whether or at least the phrase more risks and opportunities in their life. you had a remarkable experience to write about with a credit card. tell us a little bit about that and the broader left untreated advanced the >> first of all, i understand why people worry about that. unfortunately, the credit products available to low hospitals can be quite sensitive and quite abusive. i think it is good that they worry. yes, those that are financially sophisticated -- i'll put