Mortgage Insurer's Risk Criticized

The federal government's mortgage-insurance agency is understating how much risk it has taken on, says a group of economists from the New York Federal Reserve and New York University, increasing the likelihood the agency may need taxpayer funds. The economists warn that the Federal Housing Administration—which has jumped to fill the void left by the collapse of the private mortgage market—is overlooking factors that signal higher losses, according to a working paper released Thursday. The economists warn that by underestimating the risks it faces, the FHA has increased the likelihood that it will have to ask Congress for money for the first time in its 75-year history.

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