Tuesday, June 10, 2008

FHA Chief: Hits From Down-Payment Assistance Threaten Agency’s Future

From HousingWire:

It doesn’t get much more stark than the barb lobbied by Federal Housing Administration commissioner Brian Montgomery on Monday afternoon — stop allowing down-payment assistance, or send the FHA into insolvency.

“Data clearly demonstrates that FHA loans made to borrowers relying on seller-funded downpayment assistance go to foreclosure at three times the rate of loans made to borrowers who make their own downpayments,” Montgomery said at a National Press Club event.

Such loans are currently one-third of the government agency’s portfolio, he added, and led the agency to book an additional $4.6 billion in unanticipated long-term losses in an annual re-estimate.

“No insurance company can sustain that amount of additional costs year after year and still survive,” he argued. “Unless we take action to mitigate these losses, FHA will soon either have to shut down or rely on appropriations to operate.”>>>MORE