In a recent article written by Paul Jackson, the topic of risk-based pricing expanded for FHA home loan products.  The FHA commissioner Brian Montgomery gave a speech that touched on mortgage lending for low and moderate income homes. It was suggested that the mortgage meltdown and current declining housing market could have been prevented had Congress acted on Bush administration suggestions made years ago.

In his remarks at the FDIC inspired forum, Montgomery said that Congress’ failure to modernize the FHA contributed to the subprime problem, implying that had Congress acted earlier, the mess might have been avoided.  “We were marginalized during the boom, unable to compete because of low FHA home loan limits and higher down-payment requirements,” he said. “Well, we know the outcome, a subprime mortgage crisis that has now evolved into a worldwide credit crisis.”

“Frankly, at FHA we saw the problem coming.”The strong stance taken by Montgomery surprised more than a few market participants, who said that anyone claiming the current mortgage mess might have been avoided, is wrong.  “Montgomery is usually pretty level-headed,” said one source, a senior bank executive that asked not to be named, “but this sort of grandstanding does little to help matters.”

The FHA Commissioner said that the Bush administration has pushed for FHA modernization since 2006, and that Congress has repeatedly stymied efforts to make the government insurance program “more competitive and responsive to market conditions.”