FHA Mortgage Insurance Fund Down 40%

Mortgage Law Central reports today on FHA’s Oversight Capability. 

The House Committee on Financial Services held a hearing to look into the recent Business Week story alleging that predatory lenders are alive and well originating FHA loans. The committee listened to testimony from HUD on the approval process for FHA lenders, compliance with FHA regulations, and the level of reserves in the FHA Mortgage Insurance Fund:

“Rep. Stephen Lynch, D-Mass., voiced his concern that FHA’s Mutual Mortgage Insurance Fund levels were decreasing and might go under the required two percent threshold. He said the latest data forecast, from June 2008, was done before the meltdown and he believed that the funds could dip below the 2 percent threshold.  Heist also had these concerns, stating that the results from the Office of the Inspector General’s (OIG’s ) latest actuarial study show that HUD has sustained significant losses in its Single-Family program, reducing the program’s reserves. He said that as of Sept. 30, 2008, the fund’s economic value was an estimated $12.9 billion. This is an almost 40 percent decrease from over $21 billion the year before. “The current $12.9 billion economic value represents 3 percent of the mortgages insured by the FHA,