FHA Delays Yearly Fiscal Report over ‘Accuracy’ of Methodology

The public release of an independent actuarial study of the Federal Housing Administration (FHA) was delayed late Tuesday as the firm conducting the review completes additional tests. The supplemental tests come after FHA questioned the accuracy of the actuary’s modeling.

The audit of FHA’s fiscal year 2009 — which ended in September — was scheduled for release today in conjunction with a press conference addressing the FHA’s fiscal health and financial outlook.

A US Department of Housing and Urban Development (HUD) spokeswoman indicated hours before the scheduled release that the report would not be completed in time, and FHA commissioner David Stevens later issued a statement on the cause of the delay.

“FHA asked the independent actuary, IFE [Integrated Financial Engineering], to run additional economic scenario testing above and beyond what was going to be included in the actuarial study to better understand a broader range of risk scenarios,” Stevens said. “Based on these results, we raised questions about the accuracy of IFE’s modeling and IFE therefore advised us that we should not treat the report as final. IFE is now running additional tests to ensure that the final report is accurate.”

Stevens added, “We will only release a report that we are confident is accurate and fully reflects the health of the FHA.”

FHA, which insures lenders against default-related losses on qualifying mortgages, is congressionally mandated to maintain a 2% capital reserve ratio. Stevens in a mid-September statement indicated the forthcoming actuarial review would show the FHA’s reserve ratio dipping below that required level.

Write to Diana Golobay.