NEW YORK —
The Federal Housing Administration won’t be able to earn its way to financial health this year, increasing the chance it will need a taxpayer bailout, based on an updated forecast from Moody’s Analytics, which provides the agency’s housing-market analysis.
The government mortgage insurer, which guarantees $1.1 trillion in home loans, had been counting on “robust growth” in home prices to help rebuild its insurance fund after paying $37 billion to cover defaults during the past three years, according to its annual report to Congress, filed in November.
It won’t get that growth until 2014, according to the latest outlook from Moody’s Analytics. Prices will fall 3 percent in fiscal 2012 before growing 1.4 percent in 2013 and 6.5 percent in 2014, said Celia Chen, a Moody’s Analytics housing economist who updated her estimate after providing the housing-market forecast for the FHA’s annual actuarial report.
“The FHA’s economic projections are surreal,” said Andrew Caplin, a New York University economics professor who has testified to Congress on the agency’s finances. “They must believe there will be very few readers in Congress able to critically review such a complex report.”
In their annual review, the FHA’s actuaries — risk analysts who specialize in insurance — used earlier projections that called for increases of 1.2 percent in 2012 and 3.8 percent in 2013. The agency, which backs mortgages that cover as much as 96.5 percent of a home’s value, is sensitive to changes in home prices.
By law, the FHA’s insurance fund is supposed to hold 2 percent of its portfolio in reserve; as of Sept. 30, it held 0.24 percent, or $2.6 billion, according to the report.
While the FHA issues an annual report and hasn’t updated its outlook since the new Moody’s forecast, Carol Galante, the acting FHA commissioner, says there’s no indication home prices will fall to a level where the agency would need help from the U.S. Treasury.
