SAN DIEGO (MarketWatch) -- The Federal Housing Administration is considering a variety of changes -- including requiring larger down payments for FHA-insured mortgages, demanding higher credit scores of FHA borrowers and upping FHA mortgage premiums -- to manage risk as it deals with losses in its capital reserve fund, FHA Commissioner David H. Stevens said Saturday.

"Nothing is off the table," Stevens said at the National Association of Realtors' annual conference, being held in San Diego this weekend. "I will consider everything, and I've already made several risk changes to manage the portfolio."

Yet while there is concern about the FHA's finances, its situation doesn't resemble the losses seen in the subprime mortgage market, he said.

A report released in the past week showed that the FHA has sustained significant losses from loans made before this year, as the country's foreclosure problem deepened. Its capital reserves have fallen below the threshold mandated by Congress.

By law, FHA must have two reserve accounts, Stevens explained to the Realtor audience. One is to hold funds to pay all forecasted losses, he said.

Then, "there's a secondary account, it's an excess valve that is used to pay unforecasted losses," he said. The creation of the secondary account is why FHA is "still standing while many others did not survive this tumultuous time," he said.

That secondary account is also the cause of concern.

The independent study projected that the secondary account was 0.53% of the total insurance in force this year -- below the 2% statutory threshold, according to a news release from the U.S. Department of Housing and Urban Development. That said, by combining both accounts, FHA holds $31 billion in reserves, or more than 4.5% of total insurance in force.

The study concluded that under most economic scenarios, the FHA's reserves would remain above zero. Still, some have compared FHA's troubles to those that brought down the subprime market -- a comparison Stevens says isn't fair.

Stevens said quality of FHA loans is much better than risky subprime products that became popular during the real-estate boom.

FHA-backed mortgages are for principal residences, borrowers have to fully document their income, and nearly all of them are 30-year fully amortizing fixed-rate mortgages, he said. That contrasts with poor performing subprime and Alt-a loans that required little if any income documentation and often involved low teaser rates that skyrocketed when the introductory period was over, he said payday loans with no fax.

And recently, the overall credit quality of FHA borrowers has crept up: The average borrower's FICO score today is 693, compared with 633 two years ago.

Even though FHA is considering a variety of ways to address the reserve situation, Stevens also said it's important not to jump to conclusions and "overcorrect."

"I am modeling everything right now and looking at impacts. If you are concerned about defaults in the FHA portfolio, there are only a few primary areas that you can look at. One is the [mortgage insurance] premium, second is the qualifying guidelines -- the credit score and the down payment," he said in an interview following his speech.

"But we're doing it all with an eye on our No. 1 priority, which is to get the housing market back on track ... getting stability back in the housing system is the most important thing," he said.

Those in the real-estate industry are concerned about any action that would reduce available mortgage money. If down payment requirements for FHA rise, for example, that will take some prospective buyers out of the market and slow a recovery, said Helen Hanna Casey, president of Howard Hanna Real Estate Services, during an earlier panel on Saturday.

To give an idea of FHA's recent popularity, half of the FHA's current portfolio was originated this year, Stevens said.

In the second quarter, nearly 50% of all first-time buyers in the market used a loan insured by the FHA. FHA-insured loans typically require a 3.5% down payment, which can be helpful for those buying their first home.

FHA backed about $360 billion in mortgages in 2009 and forecasts it will back $400 billion next year, Stevens said.

But FHA won't play this large of a role in the lending market forever. And it shouldn't, Stevens said.

"We are a counter-cyclical provider of capital to the housing finance system, and for it to be this large is concerning to everyone in the administration. We're filling the role and will continue to fill the role, but ultimately have to be concerned about private capital returning to the system," Stevens said.

FHA considering changes in wake of reserve losses

TOKYO/AMSTERDAM (Reuters) – Japan&&9;s Canon (7751.T) plans to buy Dutch copier and printer maker Oce (OCEN.AS) for 730 million euros (&&6;1.09 billion), challenging rivals Ricoh (7752.T) and Xerox (XRX.N) in a hunt for growth during the sector downturn.

Copier and digital camera maker Canon and Oce said in a joint statement Monday that Canon intends to offer 8.60 euros per share, or 730 million euros, for Oce&&9;s outstanding shares. The offer represents a premium of 70 percent to Oce&&9;s Friday close.

Canon&&9;s offer follows little over a year after Japan&&9;s Ricoh, the world&&9;s largest copier maker, bought U.S. office equipment distributor Ikon Office Solutions, a deal which hit Canon&&9;s U.S. operations hard as Canon machines had represented 60 percent of the products Ikon handled before the acquisition.

Canon, Oce and rivals have suffered from the economic slump, which forced companies to cut spending, including costs on copying and printing.

Oce, which was loss-making in the past two quarters, has been cutting costs and jobs and has not paid a final 2008 dividend, while Canon and Ricoh reported sharp falls in their quarterly profit last month.

"The deterioration of the economic market circumstances has influenced the performance of the industry but it was not the initiator for the strategic review process which, after thorough and careful evaluation, led to this proposal of joining forces with Canon," Oce CEO Rokus van Iperen told reporters.

Canon and Oce products are mutually supplementary, with the Japanese company having strength in regular office machines and mid- to lower-end production printers, while Oce excels in high-end production printers and advertisement-use large-sized printers, the Tokyo-based company said.

Production printers, or digital commercial printers, are used to print such documents as product manuals and direct mail quickly and in large volume, and are a fast-growing segment of the global printer market.

Oce shares were up 68.5 percent at 8.53 euros by 1119 GMT, after earlier reaching their highest level since June last year.

Including debt and other obligations, the deal values Oce -- which competes with Xerox (XRX payday loans.N) and Konica Minolta Holdings (4902.T) -- at about 1.5 billion euros (&&6;2.2 billion), Van Iperen said.

HP, KYOCERA POSSIBLE COUNTERBIDDERS

Analysts said the deal was good for Oce shareholders, as it solved most or all of the problems the company faced due to the drop in demand. They were divided about a possible rival offer.

SNS Securities said in a note Hewlett-Packard (HPQ.N) and Kyocera (6971.T) had sufficient financing options for a counter bid, while Ricoh and Konica Minolta currently had high debt levels and relatively low earnings generation.

Petercam analyst Eric de Graaf, however, said it was unlikely that another bidder would emerge because of the bid price and commitment of some shareholders and Oce&&9;s boards.

Preference share holders Ducatus, ASR and ING -- which together hold 19 percent of Oce&&9;s share capital -- agreed to sell their interests to Canon, while Oce shareholder Bestinver Gestion S.A. has agreed to tender its 9.5 percent stake.

Oce&&9;s management and supervisory boards support and will recommend the intended offer, Oce and Canon said.

Canon, the world&&9;s largest digital camera maker, is Japan&&9;s 6th-most valuable company with market capitalization totaling &&6;50 billion. Its printers and copiers accounted for 65 percent of total revenues in 2008.

Analysts said the deal is positive for Canon, while potentially negative for rival Japanese copier and printer maker Konica Minolta, which is in a business alliance with Oce.

"Konica Minolta procures high-end production printing machines from Oce, while Oce procures lower-end machines from Konica Minolta," Mizuho Securities analyst Ryosuke Katsura said.

"(The) chances are Canon machines will replace Konica Minolta gear in this relationship," he said.

Shares in Canon closed down 1.5 percent at 3,370 yen ahead of the announcement, underperforming the benchmark Nikkei average (.N225), which gained 0.2 percent.

(&&6;1=89.60 Yen)

(&&6;1=.6685 euros)

(Editing by Joseph Radford, Mike Nesbit and Simon Jessop)

Canon seeks printer power with $1.1 billion Oce bid