Robert Toll Blasts the FHA

Below is a verbatim quote from Robert Toll, CEO one of the most respected public homebuilders in the country, on the government’s FHA program. Toll was addressing a large crowd of investors at a UBS building products conference when he was asked to comment on the FHA.

How disastrous must the FHA be, such that Toll felt it prudent to warn about a program that is directly supporting his industry? So far, few people, outside of concerned investors and knowledgeable folks in the housing industry, have lamented about the problems at the FHA. The fact that Toll is now speaking up against the agency should serve as a clear warning signal to those folks in government who think they are doing a service to the country by artificially propping up the housing market via this broken federal program.


A - Robert I. Toll, Chairman and Chief Executive Officer: We had all sorts of inspectors and qualifiers and administrators that made it a big pain in the butt [ph] so Fannie, Freddie was around with the same limits of much easier financing, so why would you go FHA. Well, the reason you go FHA, FHA is the new subprime. What the government is doing is beyond belief in that once upon a time until that had its glorious days like a year and half ago. FHA did very small percentage of the business in the country. I don't know what the actual percentage, I bet it was 2 or 3% and today FHA is doing 30% of the business. And the reason is yesterday's subprime is today's FHA and whereas on a Fannie, Freddie you are talking 20% down you can go and get the last 10% if you struggle hard from another guy and give a combo rate. But on FHA you're talking 3.5% down. And now if you're doing business at $120,000 and you're given an $8,000 credit, and you're only making the guy put down 3.5, not only does he get the house but he gets some cash to walk away from the settlement table with. So yesterday's subprime is today's FHA and I think it's not --

Q: So it's potentially a train wreck again?

A - Robert I. Toll, Chairman and Chief Executive Officer>: It's a definite train wreck and --

Q: Because a lot of the guys --

A - Robert I. Toll, Chairman and Chief Executive Officer: The flag will go up within the next couple of months. It already has preliminary going up, bail us out, give us some more money.

Q: Right. I mean not you guys but again a lot of the publics have 60, 70% of their volume now coming.