FHA Hurricane Losses Could Hit $770M

Outside auditors are estimating that the Federal Housing Administration could suffer a $770 million loss due to damage to single-family homes in the Gulf Coast states hit by Hurricane Katrina.The FHA has insured $3.08 billion in mortgage financing in the hurricane disaster area, according to a fiscal year 2005 actuarial review of the FHA mortgage insurance fund. Assuming a 100% loss on 25% of the FHA-insured loans, "we estimate that Hurricane Katrina could cause a total loss of $0.77 billion over FYs 2006 and 2007," the report says. However, the auditors excluded those possible losses in reporting that the FHA's capital rate rose to 6.02% in fiscal 2005, up from 5.53% in fiscal 2004.