The Federal Housing Finance Agency (FHFA) said Monday that the combined debt of Fannie Mae, Freddie Mac, and the Federal Home Loan banks was $6.8 trillion at the end of September, exceeding the total publicly held debt of the United States by $1 trillion.

As of June, the GSEs' combined debt and obligations totaled $6.6 trillion, exceeding the publicly held debt of the United States by $1.3 trillion. The FHFA also said Monday it has "successfully integrated" the Federal Housing Finance Board, the Office of Federal Housing Enterprise Oversight (OFHEO, and staff from the Department of Housing and Urban Development in less than 90 days. In a 180-page performance and accountability report, the agency, created in July by the Housing and Economic Recovery Act, said an independent outside audit "found no material weaknesses" in the Finance Board's internal control structure.

The report included a systemwide analysis of the 12 Home Loan banks' purchases and management of mortgage-backed securities. The FHFA said in the report that OFHEO "substantially achieved" its major performance goals for the fiscal year, which ended Sept. 30, with its primary duty ensuring the safety and soundness of Fannie and Freddie, which the government took over Sept. 6.

Meanwhile, the Federal Housing Administration (FHA) has set aside $12.2 billion in reserves to cover expected losses on its single-family program after closing the books on a record fiscal year in which lenders originated $171.8 billion in FHA-insured loans. The FHA insured portfolio jumped to $479.6 billion in the fiscal year ended Sept. 30, 2008, up from $351.8 billion in FY 2007.

And its reserves jumped to $19.7 billion, up from $7.5 billion in FY 2007. The annual FHA management report attributes the sharp rise in "loan guarantee liability" to high default rates on loans with downpayment assistance and house price declines. The nationwide decline in house prices "results in increased claims and lower proceeds from the sale of foreclosed properties," the report says.

The FHA report also shows that the capital ratio for the single-family insurance fund fell to 3% in FY 2008, down from 6.4% in the previous fiscal year. By statute, FHA must maintain a 2% capital ratio.

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