TY  - JOUR
AU  - Aragon,Diego
AU  - Caplin,Andrew
AU  - Chopra,Sumit
AU  - Leahy,John V.
AU  - LeCun,Yann
AU  - Scoffier,Marco
AU  - Tracy,Joseph
TI  - Reassessing FHA Risk
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15802
PY  - 2010
Y2  - March 2010
UR  - http://www.nber.org/papers/w15802
L1  - http://www.nber.org/papers/w15802.pdf
N1  - Author contact info:
Diego Aragon
Federal Reserve Bank of New York 
E-Mail: Diego.Aragon@ny.frb.org

Andrew Caplin
Department of Economics
New York University
19 W. 4th Street, 6th Floor
New York, NY  10012
Tel: 212/998-8950
Fax: 212/995-3932
E-Mail: andrew.caplin@nyu.edu

Sumit Chopra
New York University
E-Mail: sumit@cs.nyu.edu

John V. Leahy
Department of Economics
New York University
19 W. 4th Street, 6th Floor
New York, NY  10012
Tel: 212/992-9770
E-Mail: john.leahy@nyu.edu

Yann LeCun
New York University
E-Mail: yann@cs.nyu.edu

Marco Scoffier
New York University
E-Mail: mps309@nyu.edu

Joseph Tracy
Executive Vice President
Federal Reserve Bank of New York
33 Liberty Street
New York, NY 10045
Tel: 212/720-6344
E-Mail: joseph.tracy@ny.frb.org
AB  - Federal Housing Administration (FHA) insurance has doubled over the past two years and is projected to redouble to $1.5 trillion over the next five. Despite clear signs of strain in the FHA’s Mutual Mortgage Insurance Fund, a recent actuarial review indicates that the FHA will not need any form of government support. We identify four risk factors that make such a funding request more likely; the review underestimates how many FHA borrowers are underwater and in economic distress; it uses measures of house values that lower loss estimates; it does not incorporate early-warning signals of future losses that are available from mortgage delinquency; and it ignores potential risks associated with recent down-payment assistant programs despite higher losses on previous programs of this type. We propose measures that could be taken to improve the predictive accuracy of FHA risk assessment.
ER  -