House Financial Services eyes FHA finances

Nov. 19, 2009 – A hearing on the Federal Housing Administration’s risk management practices and finances will be held following the Thanksgiving holiday, House Financial Services Committee Chairman Barney Frank, D-Mass., said Wednesday.

Frank and Rep. Maxine Waters, D-Calif., chairwoman of the housing and community opportunity subcommittee, were urged to hold a full committee hearing by Reps. Spencer Bachus, R-Ala., and Shelley Moore Capito, R-W.Va., the ranking members of the full committee and subcommittee.

The two were responding to a recent, deep decline in the FHA’s reserves. The capital reserve ratio of the Mutual Mortgage Insurance Fund, which insures FHA-backed mortgages, is down to 0.53 percent, well below the statutory minimum of 2 percent.

The decline was shown in an actuarial review, the results of which were released by the FHA last week. Besides the drop in capital reserves, the review indicated that the value of the MMIF has dropped more than 75 percent from 2008 to a total of $2.73 billion.

“If home prices do not recover,” wrote Bachus and Capito, “the economic value of the MMIF could fall below zero. We are concerned that such a drop could force HUD to request an appropriation from Congress.”

NAFCU is in discussions with the FHA regarding ways to get more credit unions involved in FHA lending.

A Dec. 10 NAFCU webcast featuring FHA Commissioner David Stevens and Barton Shapiro, HUD’s deputy director over Real Estate Settlement Procedures Act matters and interstate land sales, will provide participants with a look at RESPA requirements and the FHA’s direction. Stevens took the top post just this July.