The Federal Housing Administration's main insurance fund is in the best financial condition ever, according to an audit by a respected accounting firm. But the Department of Housing and Urban Development's own inspector general says otherwise.

So it looks like new HUD Sec. Mel Martinez already has a problem on his hands. Here's how it shapes up at this point:

In the waning days of the Clinton Administration, IG Susan Gaffney, who has had a running feud with former HUD Sec. Andrew Cuomo, issued a report claiming the FHA's single-family insurance program is "beset by fraud."

FHA Commissioner William Apgar quickly denied the charges, telling the trade publication National Mortgage News the report is "unfair."

"The idea that there is massive fraud in the FHA program is not supported by the data and clearly casts a negative image on all our mortgage lending partners," Apgar told the newspaper, noting that the number of foreclosures has fallen, loss mitigation has improved, and the insurance fund was getting stronger.

In her report, Gaffney, whose office is an independent wing of HUD, called on the new Bush Administration and Congress to "examine the potential relationships between the current single-family policies to increase the home ownership rate and the rising incidence of fraud."

However, a study by Deloitte & Touche has found that the mutual mortgage insurance fund's economic value currently stands at $17 billion and should reach $43.5 billion by 2007.

Moreover, the auditor's report, also released in the last days of Cuomo's watch at HUD, says the value will withstand potential economic downturns. Indeed, even under the most pessimistic scenario, the study says the fund's value will more than double over the next six years. Economic value in this case 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 3.51, which is nearly double the Congressionally-mandated goal of 2 percent. And it projects that the ratio will rise to 4.97 percent by 2007. Capital adequacy is the economic value of the fund divided by the total insurance in force.

The FHA does not make mortgages directly to consumers. Rather, it insures loans made by private lenders. Since its creation, the agency has backed more than 30 million home buyers who would otherwise be either locked out of the market altogether or forced to pay extremely higher interest rates for financing.

For more articles by Lew Sichelman, please press here.

Published: January 23, 2001

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.