House Panel Examines FHA Financial Outlook

By Sarah Borchersen-Keto, Washington News Bureau, Contributing Author, the Federal Banking Law Reporter and Bank Digest.

A House Financial Services Committee hearing Feb. 13, 2013 (webcast), examined the Federal Housing Administration's 2012 Actuarial Report, which showed further deterioration in the Mutual Mortgage Insurance Fund's capital reserve ratio (see 2012 No. 4663). As a result, the FHA may be forced to borrow funds from the Treasury Department to pay unexpected increases in insurance claims.

“The FHA is flat broke. And I fear soon the FHA will prove to be bailout broke,” said committee Chairman Rep. Jeb Hensarling, R-Texas. FHA Commissioner and Assistant Secretary for Housing Carol Galante told the hearing that while the actuary's findings are “obviously of very serious concern,” any determination regarding drawing on Treasury funds will not be made until the end of fiscal year 2013. She noted that the administration's budget will outline whether or not the FHA will need assistance by the end of the fiscal year, adding that “the ultimate need will be borne out in the actual performance of the FHA single family program,” as well as the steps the FHA takes to increase revenue or reduce losses.

Following the hearing, Rep. Robert Hurt, R-Va., Vice Chairman of the Capital Markets and Government Sponsored Enterprises Subcommittee, noted, “On the verge of requiring a bailout for the first time in its history, the House Committee on Financial Services has made it clear that we are willing to work with FHA on necessary financial reforms. However, with taxpayers in Virginia’s 5th District and across the country at risk, the Committee remains committed to putting an end to Washington bailouts.”