Federal Housing Administration Commissioner David Stevens said a Congressional-mandated timeline for the FHA capital ratio to return to 2% would force actions from his staff that could have "unintended impacts."

Congress mandates that the FHA's secondary reserves meet 2% of the total amount of its insurance guaranteed. Currently, it is at 0.53%.

Last year, the FHA forecast it would be three to four years before that 2% ratio would be reached, and that he remains committed to that timeline.

"We should all have a concern of FHA, and I am concerned about it. 2007 and 2008 were terrible books that were originated with limited scrutiny, and we are going to pay the price on those books for some time to come," Stevens said. "We are absolutely not out of the woods."

The FHA has taken steps to get the program back to good health, and some future actions are still pending Congressional action.

On Oct. 4, FHA will cut its upfront premium to 1% from 2.25%, while the monthly yield was increased to 0.90% from 0.55%.

Earlier in the month the FHA lowered its credit-score floor to a 500 FICO score. FHA borrowers with scores lower than 580 must now make a 10% downpayment, and only those with a higher score can make the traditional 3.5% downpayment.

"The average credit score on current insurance endorsements has risen from 634 in 2007 to nearly 700 today," Stevens said.

Stevens said the FHA has also promised to reduce seller concessions, which can create incentives to inflate appraised value, pushing more borrowers underwater and eventually leading to more defaults. FHA has proposed to Congress that the maximum seller concession be reduced from 6% to 3%.

But in July, the FHA seriously delinquent mortgages, those behind by 90 days or more, increased 31.5% from a year ago. However, it is down from a 35% year-over-year increase in June.

A Senate bill introduced in August would give the FHA even more tools to manage risk and protect the FHA fund. The bill would allow third-party FHA loan originators to close those loans in their name and would allow the FHA to hold them accountable for any detected misrepresentation or fraud.

"I believe a timeline would be the wrong way of approaching the FHA reform. To be clear, we shall do everything he can to get it back to 2%. Those steps are in process," Stevens said.

Write to Jon Prior.

Freddie Mac said mortgage rates were unchanged this week, while another rate survey set new record lows.

The Freddie Mac weekly survey put the average for a 30-year fixed-rate mortgage at 4.37% with an average 0.7 point for the week ending Sept. 23, stable from last week's slight increase. A year ago, the average rate was 5.04%.

Freddie said the 15-year FRM average also remain unchanged this week at 3.82% with an average 0.7 point — below last year's average rate of 4.46%.

The weekly Bankrate survey of large banks and thrifts shows the average 30-year FRM at 4.5% with a 0.35 point, setting a new low in the 25-year-old survey and below 5.36% a year ago. The 15-year FRM was 3.96% with a 0.35 point, down from 4% last week and also at a record low. The 30-year, jumbo FRM averaged 5.17% last week with a 0.35 point, down from 5.19% the we last week.

This week's mortgage rates were impacted by Tuesday's announcement from the Federal Open Market Committee, according to Freddie Mac vice president and chief economist Frank Nothaft.

“In its September 21st policy committee statement, the Federal Reserve indicated that the pace of recovery in output and employment has slowed in recent months," Nothaft said. "In addition, inflation was at levels somewhat below its comfort zone.  The perception of slow growth and low inflation removed any upward pressure on fixed mortgage rates this week."

Averages on five-year, adjustable-rate mortgages declined in both surveys. Freddie said the five-year, Treasury-indexed hybrid ARM averaged 3.54% with a 0.6 point, down from last week's average of 3.55% and 4.51% a year ago. Bankrate said the five-year ARM averaged 3.71% with a 0.35 point, down from 3.78% last week. The Bankrate reading was a record low for the survey.

Freddie said the one-year, Treasury-indexed hybrid ARM averaged 3.46% with a 0.7 point, up from last week's average of 3.4%, but down from last year's average of 4.52%.

Write to Austin Kilgore.

Home sales increased 7.6% in August after the drop to a decade low in July, according to the National Association of Realtors.

The annual rate of sales in August reached 4.13 million, up from the revised 3.84 million in July. But sales are still down 19% from last year. Lawrence Yun, the chief economist at NAR, said the housing market is still trying to move forward without government incentives.

"The housing market is trying to recover on its own power without the homebuyer tax credit. Despite very attractive affordability conditions, a housing market recovery will likely be slow and gradual because of lingering economic uncertainty,” Yun said.

NAR measures the completed transactions of single-family, townhomes, condos and co-ops. Also today, Freddie Mac reported the average rate on a 30-year, fixed-rate mortgage fell to a record low of 4.43% in August, down from 5.19% last year.

The national median existing home price for all housing types was $178,600 in August, up 0.8% from last year.

“Home values have shown stabilizing trends over the past year, even as the economy shed millions of jobs, because of the homebuyer tax-credit stimulus. Now that the economy is adding some jobs, the housing market needs to steadily improve and eventually stand on its own," Yun said.

Distressed sales accounted for 34% of sales in August, up from 32% in July and 31% a year earlier.

The housing inventory through August dropped 0.6% to 3.98 million homes still on the market. It represents an 11.6-month supply of houses at the current sales pace, down from a 12.5-month supply in July.

First-time buyers made 31% of the purchases in August, down from 38% in July. And investors accounted for 21% of sales in August, up from 19% the prior month.

Single-family home sales increased in 10 of the 19 largest metropolitan statistical areas. Existing condo and co-op sales increased 8.5% to an annual rate of 510,000 in August. The pace is still 17.1% below last year.

Write to Jon Prior.

Wilbur Ross's private equity investment firm is investing up to $100 million in mortgage originator Capital Markets Cooperative.

WL Ross & Co is already the majority owner of American Home Mortgage Servicing with more than $85 billion of primarily subprime mortgages.

CMC originates more than $25 billion in mortgages annually and is also a mortgage capital markets firm. The CMC trading desk and cooperative services operations facilitate the sale of mortgages to the secondary mortgage market.

CMC will use the investment to enhanced liquidity and agility for its investors, the firm said in a statement.

"The superior mortgage origination quality of the CMC client base and the significant resources and market expertise of WL Ross create a winning combination that will be tough to beat," explained Tom Millon, CEO, President, and founder of CMC.

Mark Gorman and Lindi Sabloff from Hidden River Capital acted as exclusive financial advisor to CMC on this transaction.

Write to Jacob Gaffney.