WASHINGTON (12/17/13)--The Federal Housing Administration mortgage insurance fund appears to be approaching a key post-subprime crisis benchmark sooner than expected.
FHA accounting shows the fund moving toward a 2% statutory capital requirement two years ahead of schedule, according to an agency report released on Friday.
The fiscal year 2013 report shows capital reserves at a negative $1.3 billion on Sept. 30, up $15 billion from $16.3 billion, on an annual basis. The capital ratio consequently moved to negative 0.11% in fiscal year 2013, from negative 1.44% in fiscal year 2012.
FHA forecasts had predicted the minimum capital requirement would be reached by 2015.
With the updated data, the administration estimates that its mortgage insurance fund will reach a positive net worth of $15 billion in fiscal year 2014 and $27 billion in fiscal year 2015.
Rep. Jeb Hensarling (R-Texas), who is chairman of the House Financial Services Committee, criticized the agency after the report's publication, pointing out that the capital ratio is still negative and that there was a recent bailout of the FHA. In September, the agency had to ask the U.S. Treasury Department for $1.7 billion in emergency financing due to recent losses. Its reverse mortgage program needed the infusion in addition to $4.3 billion from the FHA forward fund (American Banker Dec. 13).
However, Commissioner Carol Galante said that the situation resulted from accounting rules. The administration claims it has over $48 billion in liquid assets to cover expected claims, with the reverse mortgage program now in possession of $9.1 billion in capital.
American Banker reported that Housing and Urban Development Secretary Shaun Donovan is also asking Congress to allow the agency to grant it more enforcement authority over mortgage servicers and to improve its risk management--moves, according to Donovan, that would bolster the HUD Mutual Mortgage Insurance Fund.