Tightness in the mortgage-finance sector has propelled the Federal Housing Administration's share of the home-loan market to 63 percent so far in 2009 – a record high – compared to 24 percent in the fiscal year ended September 30. Department of Housing and Urban Development Inspector General Kenneth Donohue said the spike in volume is overwhelming the agency, and could erode the integrity of Ginnie Mae mortgage bonds. Donohue’s statements came in a June 18 hearing in front of the Committee on House Financial Services Subcommittee on Oversight and Investigations,
The volume of single-family mortgage loans insured by FHA, which is overseen by HUD, more than tripled to $180 billion in 2008, Donohue said. FHA has historically been most vulnerable to fraud and exploitation when loan volume is high, he added.
Donohue said the rise of mortgage fraud among FHA lenders has depleted FHA’s mortgage insurance fund, which has fallen to $12.9 billion, or two percent of all insured assets as of September 30, from $21 billion, or 6.4 percent of assets a year earlier. Under some economic projections, that ratio could fall below the statutory requirement of two percent, requiring taxpayer assistance or an increase in premiums, he said.