On April 21st the House Appropriations subcommittee held a hearing on FHA budget proposals that are part of the FY 2011 Budget. The written testimony of FHA Commissioner Stevens is HERE. (Good background about why down payments are recommended to increase for loan applicants with low credit scores).
Through hearing transcripts made available from a Multnomah County Library electronic reference service (go hug your librarian) there was one statement at the hearing from the FHA Commissioner that was pretty stunning to me.
It occurred in response to question about why Fannie Mae rates of recovery were in the 60% range when FHA recovery rates were closer to 40% . The FHA Commish said that since many of foreclosure costs are fixed, the lower average loan amounts of FHA meant that those same costs reduced recovery %'s compared to Fannie, which had much higher average loan amounts.
The stunner was when the Commish went on to say that recovery rates varied significantly by state, AND, according to the transcript, the FHA recovery rate in Michigan was 5%.
That would mean that for a loan that FHA insured for $100,000 in Michigan, FHA is recovering only $5,000 after net foreclosure costs are subtracted from net sales proceeds. While this may be somewhat a function of low loan amounts and fixed foreclosure expenses, it still is a big WOW!
FHA Reform Bill Marked Up in House Financial Services Committee the Day Before
Also in the transcript Commish said that FHA reform bill had been introduced in House Financial Services Committee on the day before this hearing. Looks like bill was marked in that meeting; eventually those changes should be reflected in updated version of the bill H.R.5072 HERE. (Markup site for this bill and a couple of others is HERE).
FHA CBO Scoring Could Impact Funds Available for Other HUD Programs
Finally there was some reference in Appropriations hearing about the impact that a lower projected FHA surplus received from CBO might have on funds available for HUD FY 2011 budget. That issue bears watching as it could mean lower funding available for other HUD programs.
Originally created and posted on the Oregon Housing Blog