FHA Loses $4.6 Billion

And this is the organization that is supposed to bail us out of the mortgage mess?

From the New York Times:

WASHINGTON — The Federal Housing Administration expects to lose $4.6 billion because of unexpectedly high default rates on home loans, officials said Monday.

Brian D. Montgomery, the F.H.A. commissioner, attributed the unanticipated losses primarily to the agency’s seller-financed down payment mortgage program, which has suffered from high delinquency and foreclosure rates in recent years.

Housing officials said the agency was also hurt by poor performance in its traditional mortgage portfolio. F.H.A.’s projected loss, more than four times the shortfall attributed to the home program last year, raised concerns about the agency’s ability to lead the national effort to rescue homeowners facing foreclosure.

President Bush and leading Democrats in Congress are counting on the F.H.A., which is overseen by the Department of Housing and Urban Development, to help distressed borrowers refinance into stable, government-backed loans.

Mr. Montgomery said the agency planned to reopen the comment period on a proposed rule to the Federal Register that would ban the program. Under the program, a home seller arranges to cover the buyer’s down payment, using financial help from a nonprofit company, but typically adds that sum or more to the price of the house. The program, which accounted for less than 2 percent of F.H.A.-insured loans in 2000, now accounts for more than a third of the agency’s portfolio. Housing officials said that 60 percent of F.H.A.’s anticipated loss was directly attributable to the seller-financed down payment program.

Supporters of the loans, who include some powerful members of Congress, counter that the program provides much-needed assistance to low-income and minority families who would otherwise be unable to buy homes.