GAO Report Faults Underwriting, Reporting for $7 Billion MMI Fund Reestimate by FHA

摘要

Looser underwriting criteria, competition from the private sector, increased use of down payment assistance, and higher numbers of mortgage loan prepayments played a large part in forcing FHA to increase its estimate of credit subsidy and interest needed for the Mutual Mortgage Insurance (MMI) fund, according to a Government Accountability Office (GAO) report. GAO noted that the $7 billion adjustment FHA reported in its 2003 financial statements was twice the size of other reestimates made from 2000 through 2004. Moreover, the reestimate represented a greater proportion of the MMI fund's recent cohorts than the 2003 reestimates for comparable loan guarantee programs, the report notes. A cohort includes direct loans or loan guarantees for programs requiring a subsidy appropriation, even if loans aren't disbursed until subsequent years. The reestimate is significant because it follows a pattern of recent increased adjustments and generally higher credit subsidy estimates than originally projected for all post-1991 cohorts, according to the GAO.