WASHINGTON - A private audit showing huge potential losses for federal programs that insure multifamily housing loans could persuade Congress to put the brakes on Housing Secretary Henry Cisneros' plans for reinvigorating the programs, industry officials said yesterday.

But the report could so make the federal government move more quickly to implement a program enacted last year that would permit state and local governments to share the risk in insuring multifamily mortgages. many of which are backed by tax-exempt bonds, the officials said.

Despite the audit's gloomy projections, Standard & Poor's reported yesterday that the number of federally insured mortgage defaults it monitors actually dropped during the second quarter.

The audit report was prepared recently for the Department of Housing and Urban Development by the accounting firm of Coopers & Lybrand. It shows, according to Sunday's The New York Times, that $11.9 billion in multifamily mortgages insured by the Federal Housing Administration are in danger of defaulting in the next several years. That figure is more than twice the the $5.5 billion level estimated by HUD in 1991.

The key danger for HUD is that lawmakers may want to rein in the push by top department officials to increase the amount of new mortgages that receive federal insurance, housing officials said.

During the Bush administration, former Housing Secretary Jack Kemp cut back sharply on FHA insurance activities. Cisneros has said he wants to get back in the business of providing credit enhancement, so that the moribund multifamily housing industry will rebound and create more units for low-income people.

The new report "will raise a lot of issues in Congress about whether the FHA should be in this business aggressively," said one housing lobbyist who asked not to be identified.

Another problem for HUD is that Congress may need to cut the agency's overall budget in order to pay for the expected losses when they occur, said John T. McEvoy, the executive director of the National Council of State Housing Agencies.

"There's going to be a severe strain on [HUD's future budget allocations] unless the government does an exclusive bailout" of the insurance program, McEvoy said. Even if there is a bailout, Congress is likely to "wind up taking it out of the hide of HUD in some other fashion," he said.

But housing officials also cautioned against becoming overly alarmed by the report's $11.9 billion figure, because it only represents mortgages that may default. Many of those loans were originated in the early 1980s when rates were above 10%, and could still be saved from default in today's low interest rate environment, the officials said.

HUD officials "need to seize the opportunity and get in there and refinance," said Peter Bell, the executive director of the National Housing & Rehabilitation Association.

On the positive side, housing officials said the report points up the need for the risk-sharing program devised last year by Congress. Under that program, Congress directed HUD to permit state and local housing finance agencies to co-insure up to 30,000 multifamily mortgages over the next two years.

If HUD is indeed faced with staggering loan losses, as the audit report suggests, "the option of risk-sharing becomes much more attractive for the federal government" because "a properly structured risk-sharing program gives the federal government the kind of protection it did not have up to now," McEvoy said. "Everybody knows you've got to do something. You can't go on not providing any low income multifamily construction."

Allowing state and local housing agencies to co-insure loans is particularly attractive because HUD's staff has been cut to the bone over the past several years, a situation that has hampered the ability of the department even to track the health of mortgages already outstanding, said the lobbyist who asked not to be identified.

"There's been such a brain drain over there they can't underwrite this stuff," the lobbyist said. "The only area of expertise in government on this stuff is state and local government."

HUD tried risk-sharing in a different fashion several years ago, and ran into trouble. Under the Reagan administration, HUD permitted private lenders to co-insure multifamily housing loans. But defaults were high under the now-defunct program because underwriting standards were lax and many unfit borrowers were lent money.

Losses from that program, in fact, probably represent a large chunk of the $11.9 billion estimate in the audit report, industry officials said, though all said they had not seen the report.

The new program is an improvement over the old co-insurance concept because it "brings in another level of review and underwriting by agencies that do solely that, and are on a more localized level, so they have a better understanding of the local markets" in which projects are being proposed, Bell said.

Under the old co-insurance program, "the lenders had very little of their own money at risk, and therein lies the difference. We aren't going to walk away from projects we finance," said John C. Murphy, the executive director of the Association of Local Housing Finance Agencies.

Despite the bad news for HUD from the audit report, Standard & Poor's reported yesterday that that the number of FHA-insured mortgage defaults being tracked by the ratings agency declined to 10 in the second quarter of 1993, from 17 in the first quarter. The agency noted that four of the defaults removed from the list were cured when housing bonds backing the loans were refunded to obtain a lower interest rate.

"Recent low interest rates have helped many housing agencies restructure their debt to cure defaults while maintaining their FHA insurance benefits," Standard & Poor's said in the June 21 edition of Creditweek Municipal.

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