The Federal Housing Administration may need a $1 billion draw from the U.S. Treasury to cover a budget short fall. But that estimate by the Office of Management and Budget is based on the performance of FHA-insured loans back in December and does not recognize recent improvements, according to one consultant.
Since December, FHA’s performance has only gotten better in terms of loan loss severity rate, loan delinquencies and home prices, according to mortgage consultant Brian Chappelle.
“If OMB did a re-estimate, FHA would be $5 billion to $10 billion better off,” Chappelle said. “There would be no issue.”
But OMB is “stuck” with the December estimate, he explained. Under the budget rules, a draw is technically necessary because OMB cannot update its December estimate, according to the founding partner of Potomac Partners.
However, “the FHA fund is in better shape than implied by the draw. And it is a positive harbinger for the actuarial review,” Chappelle said.
HUD is slated to release the annual
