FHA Chief Confirms that Agency Won't Meet Capital Minimum

Federal Housing Administration chief David Stevens has confirmed that the government's mortgage insurer will see its reserves fall below the 2% minimum level set by Congress but said the agency is tightening its credit standards to bolster the fund. "To be clear, the fund's reserves are sufficient to cover our future losses, so FHA will not require taxpayer assistance or new congressional action," Mr. Stevens said. The commissioner told reporters there is no plan or need to increase FHA mortgage insurance premiums. FHA's auditors see the "capital reserves getting above 2% within a couple of years with absolutely no changes" in FHA policies or underwriting standards, Mr. Stevens said. But the new commissioner wants to accelerate that timetable and he outlined several changes, involving appraisals, refinancings and lender net worth requirements to reduce FHA's risks and defaults going forward. "These are the first steps in what will be an on-going increasing look at risk management within FHA," he said.