Wednesday, November 04, 2009

FHA Delays Fiscal Report

by Bill McBride on 11/04/2009 06:47:00 PM

From Diana Golobay at HousingWire: FHA Delays Yearly Fiscal Report over ‘Accuracy’ of Methodology

A US Department of Housing and Urban Development (HUD) spokeswoman indicated hours before the scheduled release that the report would not be completed in time, and FHA commissioner David Stevens later issued a statement on the cause of the delay.

“FHA asked the independent actuary, IFE [Integrated Financial Engineering], to run additional economic scenario testing above and beyond what was going to be included in the actuarial study to better understand a broader range of risk scenarios,” Stevens said. “Based on these results, we raised questions about the accuracy of IFE’s modeling and IFE therefore advised us that we should not treat the report as final. IFE is now running additional tests to ensure that the final report is accurate.”

Stevens added, “We will only release a report that we are confident is accurate and fully reflects the health of the FHA.”
And from the WaPo: FHA abruptly delays audit of agency's financial health
In September, Stevens said the audit, when released, would show that the agency's cash reserves had dropped below federally mandated levels. ... But while the reserves are at a historic low, the audit predicted that they would rebound to the required level within two to three years largely as a result of the recovery in the housing market ...

On Wednesday, neither the FHA nor the auditing firm would publicly comment about whether the preliminary data are now in question.

But Barry Dennis, president and chief operating officer of the auditing firm, said his office is working as quickly as possible to produce the final report. "In an environment like we're in today, you need to look at a number of different economic scenarios and in the process of doing that, we needed to track down some potential issues," Dennis said.
The concern is that some of the "different economic scenarios" showed the FHA would require a significant taxpayer bailout.