If it ain't broke, don't fix it.

That's the message being sent by FHA Commissioner William Apgar to Rep. Rick Lazio, R-N.Y., who has proposed merging the Federal Housing Administration with the Government National Mortgage Association, taking them out of the Department of Housing and Urban Development and turning them into a separate corporation.

And Apgar's argument is bolstered by a new independent study that found the FHA's mutual mortgage insurance fund is in its best shape since it was created in 1934.

The study by the Deloitte & Touche accounting firm says the fund has an economic value of $16.6 billion, an increase of $5.3 billion over 1998. The economic value is defined as the sum of existing capital plus the value of current insurance in force.

The report also says the FHA's capital adequacy ratio is 3.66 percent, far in excess of the Congressionally mandated goal of 2 percent. Capital adequacy is the economic value of the fund divided by the total insurance in force.

The FHA has enabled some 30 million families to qualify for mortgages since its inception by insuring the loans against default, thereby protecting lenders from losses. Ginnie Mae guarantees securities issued by private lenders that are backed by pools of FHA-insured mortgages.

The Deloitee & Touche study is the equivalent of a straight A report card, and "hardly an evaluation that shows FHA should drop out of HUD," says Apgar, who finds it "mind-boggling" that legislators continue to float proposals to spin-off even one of the agencies.

"This new study shows FHA has succeeded by bringing in more revenue for the federal government and by helping more Americans build better lives for their families and brighter futures for their communities," the FHA commissioner said. "Very few government programs can say they accomplish so much with costing taxpayers a penny."

Last year alone, the FHA returned about $1.5 billion to the U.S. Treasury. But that wasn't always the case. In fact, a decade ago, the insurance fund had an economic value of minus-$2.7 billion and a costly federal bailout seemed inevitable.

Published: March 13, 2000

Use of this article without permission is a violation of federal copyright laws.