FHA could need billion dollar bailout

by Ryan Smith27 Sep 2013

The Federal Housing Administration may need an emergency infusion from the Treasury, the Wall Street Journal reports. Citing anonymous sources familiar with the matter, the Journal said Wednesday that the FHA may need as much as $1bn.

The FHA, which insures mortgage lenders against losses, has raised fees paid by borrowers and strengthened oversight of lenders in recent years to bring in more revenue, the Journal reported. In April, however, White House budget officials projected that the agency would see a $943 million shortfall this year.

The FHA must have enough money on hand to cover all projected losses for 30 years, according to the Journal. The agency had more than $33bn available at the end of June, but an upcoming budget analysis may show the reserve to be insufficient, the Journal reported.

Rep. Jeb Hensarling (R-Texas), chairman of the House Financial Services committee, long a critic of government involvement in the housing industry, said the FHA’s troubles were another sign that Washington had become too entangled in the mortgage business.

“It’s time to return the FHA to its traditional mission of helping first-time home buyers and those with low and moderate incomes,” he said.

COMMENTS

  • by Stan J | 9/27/2013 6:49:59 PM

    The program has lost before and is losing again backing investors. That is not what was the original intent of the FHA.
    No more tax subsidies. If the market was allowed to subside to its true value after the bubble burst it would be capable of supporting itself.

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