House Members Seek FHA Financial Documentation in Letter to HUD's Donovan

Apparently fearful of another bail out,rnsix Republican members of the House Financial Services Committee sent a letterrnto the Obama Administration today asking for documents and information about thernfinances of the Federal Housing Administration (FHA).  The letter was sent to Housing and UrbanrnDevelopment (HUD) Secretary Shaun Donovan.</p

An independent audit last month showed thernFHA was facing a projected $16.3 billion deficit, suggesting it may need use anrnexisting credit line with the U.S. Treasury, something it has never before done.  This credit line became available in 1992rnafter FHA had pulled itself out of insolvency two years earlier.  The letter seeks information on how the auditrnwas prepared and a “clearer explanation” as to why the insurance fundrnhas shrunk after the committee received “optimistic predictions” fromrnthe agency last year.</p

Committee member Randy Neugebauer,rn(R-TX), a signer of the letter, told Reuters that it was imperative Congressrnknow why HUD was unable to anticipate the apparent rapid decline in thernhealth of the FHA’s mortgage insurance fund. rn”Taxpayers are heading toward another bailout and we’re trying tornascertain why – and more importantly – how we can keep that from happening,”rnNeugebauer said,</p

Congress mandates that FHA maintain arntwo percent level of cash reserves, a condition that the agency has failed tornmeet for the last four years.  FHA has takenrnaction in several areas to control risk and raise revenues.  Insurance premiums have been raised severalrntimes; credit was tightened by cutting back on seller payments at closing,rnraising credit scores, and lowering debt to income ratios.  FHA also tightened oversight of lenders andrnstepped up enforcement of its rules. </p

Reuters notes that Senate BankingrnCommittee Chairman Tim Johnson (D-SD) has been pushing for quick Senate approvalrnof a bill that already passed the House which is aimed at reducing the FHA’s needrnfor a cash infusion.  It would set a newrnminimum rate for insurance premiums, allow FHA to exclude poorly performing lenders,rnand tighten oversight of delinquent loans.  rnIt is unlikely, however that it will pass before the end of the year.

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