WASHINGTON — The financial condition of the Federal Housing Administration's mortgage insurance fund has "stabilized," according to Housing Secretary Ben Carson. But that does not mean he's ready to cut FHA premiums again.

Testifying this week at a Senate Appropriations subcommittee, Carson said he does not want to "go back" to the situation in 2011, when the FHA fund nearly depleted its capital reserves. The ratio of reserves to insured mortgages fell to 0.24%, well below the 2% statutory minimum.

Since then, it's rebounded considerably, reaching 2.23% in the latest audit. Carson suggested there is optimism about it going higher.

The FHA's capital ratio is "moving in an upward trajectory," he said.

HUD Secretary Ben Carson
The FHA's capital ratio is "moving in an upward trajectory," says HUD Secretary Ben Carson. Bloomberg News

But he said he was not prepared to follow through on last-minute plans by the Obama administration to reduce the FHA upfront premium by 25 basis points. The Trump administration placed that reduction on hold soon after taking office.

Carson added that he wants to wait on a decision until a new FHA commissioner is in place. President Trump has not yet named a new commissioner.

"We are looking forward to new leadership at FHA," Carson said.

Meanwhile, the new administration has proposed to cut the Department of Housing and Urban Development's budget by 15% to $40.7 billion, which doesn't sit well with many Democratic or Republican lawmakers.

Carson faced sharp criticism on the proposed budget cuts, particularly from Sen. Susan Collins, R-Maine, who chairs the HUD appropriations subcommittee.

"Of the proposed $7.3 billion cuts, $3 billion results from the elimination of the Community Development Block Grant program," Collins said. "While we need to pursue program reforms and find ways to reduce the share of HUD’s budget that is consumed by rental assistance, merely shifting the costs onto the low-income elderly and disabled households that comprise 57% of the participants in these programs cannot be the answer."

The CDBG program provides grants to states and local communities to fund housing and infrastructure projects. The HOME program, which would also be cut under the budget, supports public-private partnerships and provides grants to acquire, rehabilitate, and construct of affordable housing for low- and very-low-income families.

Carson noted that the government is facing a new reality because of the large amount of government spending and deficits.

"What we are really looking at is a new paradigm that is forced upon us," he said. "It would be much nicer if we just had an infinite pot of money, but we don't," he said. "The old paradigm is the government rides on a white horse with buckets of money and says build these facilities for these people. And moves on to the next project. In the new paradigm, the government comes in with money to seed projects and to create incentives for the private sector, nonprofits to get involved."

Carson noted that the low-income housing tax credit program run by the Treasury Department will still be available as an incentive for the private sector to get involved in housing projects.

But Sen. Jack Reed, D-R.I., said many such projects will not get built unless there is a HOME and CDBG program or some other incentives. "When you cut those out, it will diminish opportunities," Reed said.

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