TheMReport

April, 2012

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THE LATEST SECONDARY MARKET an undercapitalized Mutual Mortgage Insurance Fund, which declining home prices and mort- gage defaults depleted during the financial crisis. In a sign that trouble may con- tinue for the FHA, the Standard & Poor's/Case-Shiller Home Price Index uncovered a 3.8 percent decline in home prices month- over-month in December. This follows an announcement from the agency that it would raise premium fees to help make up for the shortfall in projected capital. Rep. Gary Miller (R-California) called FHA's recent premium increases "reasonable," but an interjection by the lawmaker led to a somewhat testy spat with Galante over the nature of the agency's concern for taxpayer funds and fiscal solvency. "What you're doing is counter to solvency. Your job is to write safe and sound loans," Miller said while asking the FHA commis- sioner to affirm her role with taxpayer funds. "Are you making sure FHA is solvent?" Galante responded by defend- ing financing that FHA makes available for residential construc- tion. She said that the agency plans to continue examining "appropriate values based on ap- praisals and based on underwrit- ing techniques." 'Is FHA Broke?' T he acting commis- sioner for the Federal Housing Administra- tion (FHA) fended off continuing concerns about the agency's fiscal solvency during recent testimony to the House Financial Services Committee. Lawmakers largely from the right took turns questioning Treasury draws and actuarial projections for the FHA, which remains unable to meet a 2 percent capital ratio buffer required by federal law. 70 | THE M REPORT Rep. Shelley Moore Capito (R-West Virginia) led the dis- cussion to focus on the FHA's current fiscal position, includ- ing requests for it from the 2013 budget proposed by the Obama administration. "Is FHA broke?" she asked FHA Acting Commissioner Carol Galante in one instance, referencing a Treasury draw of $688 million. "This is confusing information, and so just to be clear, FHA is not broke," Galante replied. Lawmakers question the agency's stability during a recent meeting before Congress. She said that the Treasury draw, recent premium fee raises, and new books of business would "fill the gap" needed to improve the FHA's fiscal position by fiscal year 2013. Galante said that the revenue increases would not add up to 2 percent but still offered "signifi- cant progress" for the FHA. The FHA faces continu- ing concerns over a failure by the agency to put up enough capital to meet the needs of The FHA faces continuing concerns over a failure by the agency to put up enough capital to meet the needs of an undercapitalized Mutual Mortgage Insurance Fund, which declining home prices and mortgage defaults depleted during the financial crisis. SECONDARY MARKET ANALYTICS ANALYTICS SERVICING ORIGINATION

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