Republican leaders on the House Financial Services Committee are demanding that HUD officials hand over internal documents and respond to a series of questions regarding the deterioration in the financial condition of the FHA mortgage insurance fund.
In a letter to HUD secretary Shaun Donovan, six GOP congressmen point out that the secretary gave them no indication last year that the economic value of the Federal Housing Administration fund could drop to a negative $16.3 billion in 2012 from a positive $2.6 billion in 2011.
“It is imperative that Congress fully understand how and why HUD was unable to anticipate the apparent rapid decline in the health of the Mutual Mortgage Insurance Fund. To that end, we ask that you provide the requested documents and responses...no later than Jan. 18,” the Dec. 18 letter says.
Committee chairman Spencer Bachus (Ala.) and subcommittee chairmen Randy Neugebauer (Texas), Scott Garrett (N.J.), Gary Miller (Calif.), Shelly Capito (W.Va.) and Judy Biggert (Ill.) signed the letter.
Federal government offices were closed on Monday and HUD officials could not be reached for comment.
The GOP congressmen are seeking all HUD documents and communications regarding the fiscal year 2012 FHA actuarial report, which has stirred concerns that the federal mortgage insurance fund may have to seek assistance from the U.S. Treasury.
They want to know how HUD selected the independent auditors to conduct the annual actuarial review and any data inputs HUD provided the auditing firm Integrated Financial Engineering Group.
“Please describe the process of selecting the underlying economic assumptions used by IFE,” the letter says, including house price appreciation, interest rates, and loss rates on REO and short sales.
The committee leaders also question the auditors’ projections that claims on the newer FHA books of business will decline as the economy improves.
“Given the year-to-year volatility in the audit projections, is a double-digit decline in projected claim rate for the FY 2010-2012 books a viable assumption?” the letter says.
It appears the GOP leaders believe the 2012 audit is underreporting future FHA loan losses and they are hoping to find evidence that HUD pressured the auditors to change their findings, a source said.
Rep. Jeb Hensarling, R-Texas, will become the new Financial Services Committee chairman in January, replacing Bachus. Hensarling did not sign the letter requesting the information from HUD. But the new chairman is expected to take up a FHA reform bill next year.