HUD/FHA MF Insurance Takes it On the Chin In Columbus Front Page Sunday Story, But Story Weak on Big Picture.

A Sunday front page story in Columbus Dispatch highlights problems with some FHA MF loan defaults in Columbus. A careful look at the story reveals focus is on 6 loans insured by HUD in 1997, nearly 12 years ago. Story says that HUD "cut all ties" (I assume this means paying a claim) in June 2005, nearly 4 years ago.

Lots of good detail about these loans in the story and kudos for reporter for digging them out.

However story is much thinner on bigger picture. Story says Ohio lead nation in "failed loans", but I saw no data supporting that statement. Story says taxpayers are on the hook for $56 Billion in outstanding FHA MF insurance, but elsewhere notes that annual subsidy for FHA MF insurance has been running around $10 million nationally, and also says that there were $1 billion in claims in the same year as these insurance claims occurred. IF subsidy and claim year data cited in story are for same/similar years, that would be a historical FHA MF credit subsidy rate of 1% [$10 Million/$1 Billion=1%]; this suggests that, historically at least, 99% of the annual cost of FHA MF insured claims are paid by the monthly FHA insurance premiums collected from all FHA MF insured borrowers.

A primary reason for thinness in overall story is that HUD so far has apparently missed opportunity to better highlight any context: default/claims rates, collections vs payouts etc. (Generally speaking, HUD Public Affairs forbids HUD Field Office Directors from answering media questions, so while underwriting may have been Field Office issue, lack of response is PA issue).

I am guessing that HUD will now get off the dime and respond in detail, but clearly an adverse Sunday front page story is better dealt with before rather than after the fact.

1. Story is HERE.
2. Graphic showing defaulted properties is HERE.
3. Players in the deal are HERE.