Consternation on FHA at MBA Show

Although new FHA Commissioner David Stevens denies doomsday predictions that his will be the next mortgage giant to fall, two longtime industry consultants told National Mortgage News at the MBA convention they believe the agency is in big trouble -- bigger even than what a former Fannie Mae executive warned of last week before a House subcommittee. Scott Cooley and Thomas LaMalfa said it is almost a foregone conclusion that the Federal Housing Administration will go under. The agency will be "the next Fannie Mae" and will cave "within two or three years," predicted Mr. LaMalfa, who began saying in 1996 that Fannie Mae and Freddie Mac were accidents waiting to happen. By the agency's own admission, one of four borrowers who took out FHA-insured loans in 2007 are currently behind on their payments, as are one in every five borrowers who obtained their mortgages last year. Mr. Stevens has said the FHA is currently recording its best book of business in years. Both Mr. LaMalfa and Mr. Cooley (a pioneer in mortgage software) also said the mortgage market has much further to tumble before it begins a long, slow climb back from the depths of the housing depression.