Moreover, the auditor's report, also released in the last days of Cuomo's watch at HUD, says the value will withstand potential economic downturns. Indeed, even under the most pessimistic scenario, the study says the fund's value will more than double over the next six years. Economic value in this case is defined as the sum of existing capital plus the value of current insurance in force. The report also says the FHA's capital adequacy ratio is 3.51, which is nearly double the Congressionally-mandated goal of 2 percent. And it projects that the ratio will rise to 4.97 percent by 2007.
Capital adequacy is the economic value of the fund divided by the total insurance in force.
The FHA does not make mortgages directly to consumers. Rather, it insures loans made by private lenders. Since its creation, the agency has backed more than 30 million home buyers who would otherwise be either locked out of the market altogether or forced to pay extremely higher interest rates for financing. For more articles by Lew Sichelman, please press here . Lew Sichelman has been covering real estate from his home base in the Nation's Capital for more than 30 years.