FHA delays the release of disputed audit of its finances. Surprised??????

[dixiegrrrrl]

The Federal Housing Administration abruptly delayed the release of a long-awaited independent audit of the financial soundness of the agency, citing potential problems with the accuracy of some of the study's economic models.

The audit, compiled by Integrated Financial Engineering of Rockville, was scheduled to be released Wednesday, and the agency's top officials planned to brief reporters on its results.

But on Tuesday evening, the agency postponed the event, saying the report had yet to be finalized. In a separate statement Wednesday, FHA Commissioner David H. Stevens said the delay was related to economic scenario tests that the agency requested "above and beyond" what was originally to be included in the audit so that the FHA could "better understand a broader range of risk scenarios."

link to article:
http://www.washingtonpost.com/wp-dyn/content/article/2009/11/04/AR2009110403791.html


and, more importantly, link to Denninger's take on the REAL reason for the delay:
http://market-ticker.denninger.net/archives/P2.html

Economic models eh? You mean an institution that is levered 50:1
(which the FHA currently is, if I'm doing the math right) could have a wee problem should something go wrong? What could go wrong? Oh, maybe things like this:

Most banks rejected Ms. DeForte because her debt level was too high and her credit score too low. But Lend America put Ms. DeForte into a $402,000 loan backed by the Federal Housing Administration, a New Deal-era agency that Washington and Wall Street were relying upon to pick up the slack in the mortgage market as private lenders pulled back. Ms. DeForte fell behind on payments six months later and is seeking a loan modification. Taking the loan was "a stupid mistake," the 46-year-old office manager said.

It may have been a stupid mistake but the principle of asymmetric information meant that the FHA knew damn well what it was doing, and did it anyway. Ms. DeForte might not have understood it at the time (and now recognizes that it was a stupid mistake), but both Lend America and The FHA don't have that excuse.

Indeed, as I've documented, the FHA has been willing to write paper with their guarantee on loans with DTIs (debt-to-income) ratios exceeding 50%!

[aSpeckofDust]

1. But they aren't done shredding documents yet! N/t

[sandnsea]

2. Where do people in debt live? n/t