FHA Can Scrape Through FY 2013 Without Bailout

Premium hikes along with underwriting and regulatory changes have reduced the likelihood the FHA mortgage insurance fund will need to borrow from the U.S. Treasury this year, according to FHA commissioner Carol Galante.

At the end of fiscal year 2012 (Sept. 30), FHA had $3.3 billion left in its capital reserve account after setting aside additional funds for expected loan losses. On June 30, the FHA Mutual Mortgage Insurance Fund had $9.8 billion in the capital reserve account.

“The fact that the MMI Fund ended the fiscal year with this balance is due primarily to policy changes made during FY 2012 that substantially improved the value of the fund,” Galante told a House committee Wednesday morning.

More policy changes are being implemented, she testified, which are “designed to reduce the likelihood that FHA will need to draw on Treasury assistance at the end of FY 2013,” she testified.

Despite the commissioner’s testimony Republicans on the House Financial Services Committee remain skeptical that FHA can overcome the losses it is experiencing on 730,000 seriously delinquent loans.

Rep. Randy Neugebauer, R-Texas, complained that HUD keeps claiming that FHA is in recovery and getting better. “Yet the facts don’t prove that out and each year the projections are missed.”

A few weeks ago, the Congressional Budget Office updated its estimates of federal revenue and deficits, which included an unexpected increase in FHA revenue.

Since releasing its August 2012 estimate, CBO noted that FHA receipts were $4 billion higher than initially estimated.