Federal Housing Administration Proposed Legislative Changes Would Affect Borrower Benefits And Risks To The Insurance Funds

Author : United States Government Accountability Office
Publisher :
ISBN 13 : 9781469971506
Total Pages : 24 pages
Book Rating : 4.9/5 (715 download)

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Download or read book Federal Housing Administration written by United States Government Accountability Office and published by . This book was released on 2011-12-01 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: For the third consecutive year, FHA reported that the Fund's capital ratio (the ratio of economic value to insurance-in-force) has not met the 2 percent statutory minimum (see below). FHA cites declines in the Fund's economic value due to higher-than-expected defaults, claims, and losses. At the same time, the other component of the ratio, FHA's insurance-in-force, has grown rapidly. The Fund's condition also worsened from a budgetary perspective, with balances in the Fund's capital reserve account reaching new lows. If the account were depleted, FHA would require more funds to help cover costs on insurance issued to date. FHA enhanced methods for assessing the Fund's financial condition but has not yet addressed GAO's 2010 recommendation for improving the reliability of its estimates. It relies on a single economic forecast, which does not fully account for variability in future house prices and interest rates. An approach that would simulate hundreds of economic paths for house prices and interest rates would improve the reliability of its capital ratio estimates. FHA has taken or plans a number of steps to better assess and manage risk. It created a risk office in 2010 and hired a consultant to recommend best practices. FHA plans to charter committees to evaluate risks at enterprise-wide and programmatic levels. It began a quality control initiative in the Office of Single Family Housing, in which program and field offices assess and report on risks. FHA also enhanced lender and appraiser reviews. While FHA's consultant recommended integrating risk assessments, the quality control and risk office activities currently remain separate efforts. Also, the Office of Single Family Housing has not annually updated assessments since 2009 as required. Without integrated and updated risk assessments that identify emerging risks, FHA lacks assurance it has identified all its risks. Further, human capital presents challenges. FHA has not created a systematic workforce plan to identify critical skills and skill gaps. Such a plan will be needed because high percentages of staff are eligible to retire soon. Without a workforce planning process that includes succession planning, FHA's ability to systematically identify workforce needs is limited.