Apparently fearful of another bail out,
six Republican members of the House Financial Services Committee sent a letter
to the Obama Administration today asking for documents and information about the
finances of the Federal Housing Administration (FHA). The letter was sent to Housing and Urban
Development (HUD) Secretary Shaun Donovan.
An independent audit last month showed the
FHA was facing a projected $16.3 billion deficit, suggesting it may need use an
existing credit line with the U.S. Treasury, something it has never before done. This credit line became available in 1992
after FHA had pulled itself out of insolvency two years earlier. The letter seeks information on how the audit
was prepared and a "clearer explanation" as to why the insurance fund
has shrunk after the committee received "optimistic predictions" from
the agency last year.
Committee member Randy Neugebauer,
(R-TX), a signer of the letter, told Reuters that it was imperative Congress
know why HUD was unable to anticipate the apparent rapid decline in the
health of the FHA's mortgage insurance fund.
"Taxpayers are heading toward another bailout and we're trying to
ascertain why - and more importantly - how we can keep that from happening,"
Congress mandates that FHA maintain a
two percent level of cash reserves, a condition that the agency has failed to
meet for the last four years. FHA has taken
action in several areas to control risk and raise revenues. Insurance premiums have been raised several
times; credit was tightened by cutting back on seller payments at closing,
raising credit scores, and lowering debt to income ratios. FHA also tightened oversight of lenders and
stepped up enforcement of its rules.
Reuters notes that Senate Banking
Committee Chairman Tim Johnson (D-SD) has been pushing for quick Senate approval
of a bill that already passed the House which is aimed at reducing the FHA's need
for a cash infusion. It would set a new
minimum rate for insurance premiums, allow FHA to exclude poorly performing lenders,
and tighten oversight of delinquent loans.
It is unlikely, however that it will pass before the end of the year.