FHA Chief: We Won't Need a Capital Infusion from Congress

The Federal Housing Administration mortgage insurance fund will not need a capital infusion from Congress, the FHA commissioner said in response to concerns that the program is experiencing larger than expected credit losses due to delinquencies and home price declines. "FHA will not need a congressional subsidy even if the congressional capital reserve ratio falls below 2%," FHA commissioner David Stevens said in response to a report in The Wall Street Journal that rising defaults have "eaten through" FHA's capital cushion and that the fund is in danger of falling below the statutory minimum of 2%. FHA's capital reserve is based on an annual actuarial study that is generally completed by October. The FHA commissioner said he would not comment on FHA's reserve ratio until he sees the study. At the end of the second quarter, 6.88% of FHA single-family loans were 90 days or more past due, up 35 basis points from June 2008, according to FHA. FHA foreclosures are up 17%, however. Meanwhile, the new commissioner has been conducting a thorough review of FHA's credit parameters. "It is expected that FHA will be coming out with some new tightening measures in the next several weeks, which the industry will welcome," said Brian Chappelle, a mortgage banking consultant with Potomac Partners in Washington.