Housing Secretary Henry G. Cisneros said last week that the Federal Housing Administration's financial picture is beginning to brighten.
The administration, which insures billions of dollars in single-family and multifamily housing loans, has been plagued for years by huge loan losses due to mismanagement in the early 1980s.
But a recently audit by Price Waterhouse suggests the agency is "on the road to recovery," Cisneros said in a statement on Wednesday.
The audit shows that the agency's multifamily loan-loss reserve was reduced by $1.6 billion, to $10.3 billion, for fiscal 1993. The los reserve is an estimate of what the administration can lose from defaults on insured multifamily loans.
The reduction reflects "improvements in the economy, a decrease in the risk of default by refinancing of loans at lower interest rates, early returns from a new asset management strategy, effective underwriting of loans, and improvements in the accuracy of FHA's data," Cisneros said.
For the first time, the FHA received a clean opinion on its complete financial statement, reflecting the auditors' confidence in the accuracy of the agency's financial date, Cisneros said. In addition, for the first time since fiscal 1988, the total net income for all of the agency's insurance funds was positive.
