Patrick McHenryChairman

WASHINGTON, November 18, 2009 -

- Financial Services Committee Ranking Member Spencer Bachus and Housing Subcommittee Ranking Member Shelley Moore Capito urged Chairman Barney Frank and Housing Subcommittee Chairwoman Maxine Waters to convene a hearing to examine the precipitous decline in the Federal Housing Administration's (FHA) capital reserves. On November 12, the Department of Housing and Urban Development released an actuarial review which found that FHA's capital reserve ratio has fallen to 0.53 percent.

"The review showed that the MMIF's capital reserve ratio dropped below the Congressionally-mandated threshold of two percent to a less-than-expected 0.53 percent.  If home prices do not recover, the economic value of the MMIF could fall below zero.  We are concerned that such a drop could force HUD to request an appropriation from Congress," Bachus and Capito  wrote.

"HUD has announced its implementation of ‘several reforms to strengthen its credit policies, which will ultimately help shore up the reserves and reduce risk,' including hiring a Chief Risk Officer.  These are encouraging and necessary steps.  Despite these efforts, however, we are concerned that the agency continues to lack the technological and management capacity to perform proper oversight of its single-family loan insurance portfolio."

"As the authorizing committee with oversight responsibility over FHA -- and as the stewards of taxpayer dollars that are now very much at risk because of FHA's deteriorating financial position -- it is incumbent upon our Committee to get prompt answers to the many questions surrounding FHA's risk management practices and finances," Bachus and Capito state in the letter. 

Click here to view a copy of the letter.