The Clinton administrations hopes of getting its FHA legislation approved by years end got a boost June 8 when a Price Waterhouse audit revealed the agency was on target to greatly surpass its congressionally mandated capital ratio standards for the year 2000. But opponents of the legislation said the substance of the audit hasnt been issued yet, and warned that only certain results that justify the governments proposed changes were made. The Price Waterhouse audit, which was released June 8, showed a 1.44% capital ratio for the mutual mortgage insurance fund, a positive net income for the first time since fiscal year 1988, and a $1.6 billion reduction in the multifamily loan loss reserve. It also projected the capital ratio would be at 3.4% by the year 2000, a full 1.4% over the congressional mandate of 2%. Mortgage insurers, however, said that the study HUD released is the inspector general summarynot the actuarial reviewand that the difference is critical. The audit shows that the [Mutual Mortgage Insurance Fund] is worse off in fiscal year 1993 than in FY 1992, said Suzanne Hutchinson, executive vice president of the Mortgage Insurance Companies of America, in a written statement. Fund revenues which grew in 1993, primarily in response to [1990] legislative initiatives, were not sufficient to cover increased expenses needed to manage FHA losses on properties. Supporters of the legislation were quick to defend the study, however. Its a tremendous help, said Sharon Canavan of the audit. Canavan, a regulatory counsel with the Mortgage Bankers Association, disputed MICAs position on the audit and characterized the groups position on the study as a canard and accused it of blatantly playing with the facts. Canavan also said that the 1992 Price Waterhouse study came in two stages, with the actuarial study arriving in July. There was not a dramatic difference between the two, she said of the two reports. And if were talking about a 3.4% ratio, even if its a little off, its still well over the mandate. The positive audit has HUD upbeat on its legislative agenda, and HUD Secretary Henry Cisneros said it creates a stronger argument for the proposals, and that the department was cautiously optimistic about its FHA legislation. He also said that the department had been in close consultation with Congress, and realized the higher loan limits remain a contentious issue. The anti-FHA furor raised by thrifts and mortgage insurers may have died down over the break, however. And House sources believe that when the housing reauthorization legislation, H.R. 3838, goes before the full House Banking Committee June 15 and 16, Chairman Henry B. Gonzalez, D- Texas, will bring a number of modified proposals with himincluding a possibly revamped provision to raise the FHA loan limit, and at least one altered demonstration proposal, possibly a risk-sharing program. But the audit wasnt all roses for FHA. Price Waterhouse cited shortages in staffing levels at FHA as a negative factor, but Cisneros said that some of the provisions that HUD has requested in its legislationsuch as the risk-sharing programswill allow HUD to find partners to assume some of the agencys responsibilities.

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