Impact of FHA Loan Policy Changes on Financial Losses and Homebuyers

GAO discussed the impact of proposed policy changes to the Federal Housing Administration's (FHA) Mutual Mortgage Insurance (MMI) Fund on the Fund's cash position. GAO found that: (1) raising the mortgage ceiling to 95 percent of a state's median house price would have the greatest positive effect on the Fund's cash balance; (2) raising the mortgage ceiling will also generate the most new business for FHA, thereby increasing the government's financial risk in the form of additional insurance-in-force; (3) the proposed policy change to eliminate the financing in FHA-insured mortgages could help improve the Fund's soundness, but could also mean that a number of homebuyers may be forced out of the market; and (4) the losses being incurred by the MMI Fund do not result only from economic factors, but from poor management and waste, fraud, and abuse.