After growing steadily for a couple years, the Federal Housing Administration’s loan volume and market share dropped between 2009 and 2010, and this reflects the drop in the number of reverse mortgage loans the FHA insured, says a November 2011 Government Accountability Office (GAO) report.
The number of FHA-insured loans expanded substantially between 2006 and 2010, but as reliance on government insured loans increased, so did the financial risks involved with meeting the needs of so many borrowers, prompting the administration to ask the GAO to evaluate its risk assessment strategy.
The report shows the FHA’s loan volume growing from less half a million, and $70 billion in mortgage insurance in 2006, to 1.7 million loans, for $319 billion in 2010. These numbers represented a decrease from 2009’s levels of 1.9 million loans and $350 in mortgage insurance, which the GAO attributes to a decrease in the number of refinance and reverse mortgages FHA insured.
Nevertheless, the FHA insured 40% of all home mortgages, the report found, up from 4.5% in 2006.
“While FHA has taken steps to identify risks in its single-family programs, it has not combined these risk assessment efforts and lacks annual assessments and tools to anticipate risks from changing conditions,” says the GAO.
“FHA should develop an integrated risk assessment strategy, conduct annual risk assessments, establish ongoing mechanisms to anticipate emerging risks, and develop workforce and succession plans,” was the GAO’s recommendation. “HUD agreed with the recommendations, stating that it was either currently working toward achieving the recommendations or had plans to do so in the very near future.”
View the GAO report, Improvements Needed in Risk Assessment and Human Capital Management.
Written by Alyssa Gerace