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FHA Insurance Reserves Fall Below 2% Threshold
The Federal Housing Administration announced last week that its insurance reserves had fallen below its congressionally mandated threshold to their lowest level ever.
The FHA’s capital reserve ratio, which measures reserves after accounting for projected losses, fell to 0.53% in the 12-month period that ended on Sept. 30, 2009 — below the 2% cushion required by Congress.
Consequently, the U.S Department of Housing and Urban Development (HUD) will have to take steps to increase the reserve fund.
At a Nov. 12 press briefing announcing the results of this year’s audit, HUD Secretary Shaun Donovan said the FHA mortgage insurance program has enough cash reserves to remain solvent during the current housing downturn, but acknowledged that HUD and the FHA are considering additional measures to restore the reserve level.
The low estimate for the capital reserve does not mean that the insurance fund will require a bailout.
Donovan noted that the fund has almost $31 billion in cash and that $27 billion of it has been set aside to cover anticipated losses on FHA-insured mortgage loans — leaving the fund with a cash cushion of slightly less than $4 billion.
FHA Commissioner David Stevens noted that the borrowers on loans that have been booked to date in 2009 have far better credit profiles than those from previous years. He said that the better credit profiles combined with the greatly increased volume of FHA-insured loans are positive indicators of the program’s future health.
Donovan and Stevens also noted several steps that the FHA has taken to address risks to the fund, including:
- Increased risk management capabilities, including the hiring of the agency’s first chief risk officer.
- Tightened rules for appraisals and lender approvals, as well as strengthened enforcement of problem loans.
- Termination of the seller-funded downpayment assistance program, which accounted for the bulk of the decline in the capital reserve ratio. The FHA states that without these losses, the reserve ratio would have been at the 2.0% threshold.
Despite these actions, the audit report has raised concerns about possible new restrictions on FHA as well as calls for higher downpayments.
Anticipating these reactions, NAHB signed onto a letter to all members of Congress urging continued support for FHA and cautioning against unnecessary program changes or restrictions.
For more information, e-mail Bill Renner at NAHB, or call him at 800-368-5242 x8597.
 Web Site One-Stop Shop for Tax Credit Info
Builders and other industry professionals can help spur home sales by referring prospective home buyers to www.federalhousingtaxcredit.com. The NAHB Web site provides detailed information on both the expanded $8,000 first-time home buyers tax credit and the new $6,500 repeat buyers tax credit recently signed into law by President Obama.
Consumers can use the Web site to find information on both tax credits — including frequently asked questions and links to social media sites that provide updated information as it becomes available. It also includes a number of home-buying resources for consumers.
Industry professionals are encouraged to highlight the tax credit Web site when marketing to their potential home buyer market.
 Webcast of Fall Construction Forecast Conference Now Available
An on-demand webcast of the 2009 Fall Construction Forecast Conference held at the National Housing Center in Washington, D.C., on Oct. 21 is now available for purchase.
The webcast fee includes access to the webcast archive and electronic copies of the conference handout and presentation materials. Multiple viewers in one office can purchase the webcast for one fee.
The on-demand webcast also gives viewers complete flexibility in their viewing experience — pause, skip forward and backward, or jump directly to your topics of interest. The webcast is available for $250.
To view the webcast schedule, topics of discussion and a list of the presenters, click here.
To purchase and download the webcast, click here.
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