By Jessica Holzer Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- Secretary of Housing and Urban Development Shaun Donovan said Wednesday the Federal Housing Administration would need to revamp its computer systems and improve employee training and fraud detection tools to cope with a surge in its business.
There are growing concerns that taxpayers may get hit for the first time with losses from the program, created during the Depression to ensure the flow of mortgage credit to borrowers who can afford only small down payments.
Roughly 7.5% of FHA loans were seriously delinquent at the end of February, up from 6.2% a year earlier, The Wall Street Journal reported.
"I do think FHA needs to become more nimble, more flexible," Donovan told Dow Jones Newswires Wednesday. Increased staff, better training and leadership would make FHA "a safer, sounder entity than it has been," he said.
President Barack Obama has nominated David Stevens, a real estate company president and former Freddie Mac (FRE) executive, to head the FHA. Donovan praised the choice, saying he welcomed having a person with such significant mortgage market experience at the helm of the FHA.
The FHA, which is housed in the Department of Housing and Urban Development, insures mortgage lenders against the risk of defaults on home mortgages that meet certain standards. Borrowers must make a 3.5% to qualify for an FHA loan.
Borrowers have flocked to FHA mortgages as other mortgage credit has dried up. The FHA's share of the U.S. mortgage market soared to nearly a third of loans originated in last year's fourth quarter from about 2% in 2006, according to Inside Mortgage Finance, a trade publication.
Donovan will testify Thursday before the Senate Appropriations subcommittee on the role of the FHA in the housing crisis.
He said the administration would be asking Congress for an increase in funds to upgrade the FHA's technology and boost its staff. However, he declined to say how big the increase would be before the White House releases its detailed 2010 budget later this spring.
This year, HUD received $12.7 million in additional funds for the FHA. HUD is using the money to hire an extra 200 people, Donovan said.
-By Jessica Holzer, Dow Jones Newswires; 202-862-9228; jessica.holzer@dowjones.com
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Publié le 01 Avril 2009 Copyright © 2009 Dowjones