OMB Eyes FHA Estimates for Home Values, MIPs

The Office of Management and Budget is considering changes to the estimates the Federal Housing Administration is using for house values over the next several years, which could lead to a possible increase in mortgage insurance premiums FHA charges on single-family loans. Sources also note that losses on FHA loans with seller-funded downpayment assistance continue to rise. A re-estimate by OMB could show "massive losses," which might require a congressional appropriation or higher premiums, said a former Department of Housing and Urban Development official. William Apgar, senior advisor to the HUD secretary for mortgage finance, said HUD is working with OMB, but he could not comment further because the budget projections have not been finalized yet. Mr. Apgar noted that FHA is vulnerable to rising unemployment, declines in house prices and a weak economy. The FHA program has weathered many housing downturns, Mr. Apgar said. "FHA has historically played the role as the stabilizer in tough markets." OMB is expected to send the President's fiscal year 2010 budget to Congress in late April to early May.