Concerns are growing about FHA’s stability
WASHINGTON - First it was Fannie Mae and Freddie Mac. Now concern is growing that another government mortgage giant might teeter.
A year after Fannie and Freddie were effectively nationalized, problems at the Federal Housing Administration are raising worries among industry executives and Washington policy makers.
In testimony before a House subcommittee yesterday, the FHA’s commissioner, David H. Stevens, assured lawmakers that his agency would not need a bailout and that it was taking steps to manage its risks.
“I’ve already begun to improve portfolio analysis and risk management,’’ Stevens said.
But he acknowledged that some 20 percent of FHA loans insured last year - and as many as 24 percent of those from 2007 - faced serious problems, including foreclosure.
Stevens said the FHA, which insures mortgages with low down payments, holds more than $30 billion of cash in reserve, and the average credit score of borrowers is about 9 percent higher than two years ago.
The issue of FHA’s financial health took on new urgency as skeptical lawmakers and critics focused on its reserve levels. In prepared remarks, a former Fannie Mae executive predicted losses might soon overwhelm the FHA.
Since the bottom fell out of the subprime mortgage market, the FHA has assumed a growing role in the nation’s housing market.
To critics, among them Republican lawmakers, the agency’s rapid growth recalls the ill-fated expansion of Fannie Mae and Freddie Mac during the housing boom. They worry that the FHA, like Fannie Mae and Freddie Mac, might need to be rescued by the government.
