Magazine article Mortgage Banking

AEI's Pinto Points to Signs of Deterioration in FHA's Financial Condition

Magazine article Mortgage Banking

AEI's Pinto Points to Signs of Deterioration in FHA's Financial Condition

Article excerpt

In the wake of the release of the latest actuarial report on the insurance fund that backs the Federal Housing Administration (FHA) mortgage program, a key credit analyst identified signs of ongoing deterioration in the outstanding FHA book of business. Ed Pinto, housing expert with the American Enterprise Institute (AEI), Washington, D.C., and former executive vice president and chief credit officer with Fannie Mae, in early December released a set of observations on the current state of the FHA insurance fund.

Pinto noted that FHA would need another $21 billion to meet its congressionally mandated capital cushion of 2 percent. He also highlighted the fact that the FHA increase in the 60-to-89-day delinquency rate is a leading indicator of future claims problems.

Pinto pointed out that at 9.05 percent, FHA's serious delinquency rate is now 0.8 percent higher than the 8.2 percent rate in June 2011. The June rate was used to prepare the recently released actuarial report, so the credit quality has worsened since the latest report was issued.

Pinto notes that as a result of the worsening situation, there were about 75,000 more seriously delinquent FHA loans in October compared with June, when the actuarial assessment of the fund was done. …

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