FHA Predictions Slammed in Budget

The Federal Housing Administration cannot accurately predict losses on the single-family loans it insures or demonstrate its ability to reduce fraud, according to the president's fiscal year 2006 budget request to Congress."FHA will continue current efforts to develop a credit model that more accurately and reliably predicts defaults," a budget document says. The Office of Management and Budget annually predicts FHA claims on loan defaults and foreclosures will decline, but they don't. In the fiscal year 2005 budget proposal, OMB predicted claims would decline to $4.5 billion. Now OMB estimates the claims will total $5.9 billion when the FY 2005 ends Sept. 30. For FY 2006, OMB projects that FHA claims will decline to $5.4 billion.