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sábado, outubro 10, 2009

Is F.H.A. the Next Shoe to Drop?

Is F.H.A. the Next Shoe to Drop?
October 8, 2009, 3:34 pm

First it was Fannie Mae and Freddie Mac. Now concern is growing that another government mortgage giant might teeter, just as the nation’s housing market is stabilizing.

A year after Fannie and Freddie were effectively nationalized, problems at the Federal Housing Administration are raising worries among industry executives and Washington policy makers, The New York Times’s Louise Story reports from Washington.

In testimony before a House subcommittee on Thursday, the F.H.A. commissioner, David H. Stevens, assured lawmakers that his agency would not need a bailout and that it was taking steps to manage its risks.

“I’ve already begun to improve portfolio analysis and risk management,” Mr. Stevens said. “We’ve made more significant credit policy changes in my first two months here than F.H.A.’s made in decades.”

But he acknowledged that some 20 percent of F.H.A. loans insured last year — and as many as 24 percent of those from 2007 — faced serious problems, including foreclosure, offering a preview of a forthcoming audit of the agency’s finances.

Mr. Stevens said that the F.H.A., which insures mortgages with low down payments, holds more than $30 billion of cash in reserve to cushion against potential losses, and the average credit score of borrowers is about 9 percent higher now than two years ago.

“Let me simply state at the outset that based on current projections, absent any catastrophic home price decline, F.H.A. will not need to ask Congress and the American taxpayer for extraordinary assistance — we will not need a bailout,” Mr. Stevens said in his testimony.

The issue of F.H.A.’s financial health took on new urgency as skeptical lawmakers and critics focus on its reserve levels. In prepared remarks, a former Fannie Mae executive predicted that losses might soon overwhelm the F.H.A, prompting a government bailout.

Since the bottom fell out of the subprime mortgage market, the F.H.A. has filled the void left by banks and assumed a growing role in the nation’s housing market. Created in 1934 to help lower-income and first-time buyers buy homes, the agency now insures roughly 5.3 million mortgages, with a combined value of $652 billion, on single-family homes.

To critics, among them Republican lawmakers, the agency’s rapid growth recalls the ill-fated expansion of Fannie Mae and Freddie Mac during the housing boom. They worry that the F.H.A., like Fannie Mae and Freddie Mac, might need to be rescued by the government.

“It appears destined for a taxpayer bailout in the next 24 to 36 months,” the former Fannie Mae executive, Edward Pinto, said in testimony prepared for the hearing. Mr. Pinto, who was the chief credit officer from 1987 to 1989 for Fannie Mae, predicted losses on its mortgage insurance would more than wipe out the agency’s reserves.

Much is at stake. In addition, principal and interest on mortgage-backed securities containing F.H.A.-insured loans are guaranteed through the Government National Mortgage Association, known as Ginnie Mae. That means the taxpayer is responsible if the mortgages underlying those securities fail.

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