FHA projected to exhaust reserves, could need bailout

WASHINGTON –The Federal Housing Administration, which has played a crucial role in stabilizing the housing market, said it ended September with $16.3 billion in projected losses — a possible prelude to a taxpayer bailout.

The precarious financial situation could force the FHA, which has been self-funded through mortgage insurance premiums since it was created during the Great Depression, to tap the U.S. Treasury to stay afloat.

The agency said a determination on whether it needs a bailout won’t come until next year.

The FHA is required to maintain enough cash reserves to cover losses on the mortgages it insures. But in its annual actuarial report to Congress, the agency said a slower-than-anticipated housing market recovery has led its reserves to fall $16.3 billion below anticipated losses.

The FHA and the Department of Housing and Urban Development, which oversees it, said the report “does not mean FHA has insufficient cash to pay insurance claims, a current operating deficit or will need to immediately draw funds from the Treasury.”

A request for taxpayer money would come in President Obama‘s 2014 budget, set to be released in February, with a final determination of whether the FHA needs the funds coming next September. The FHA has permanent and indefinite authority to draw money from the Treasury, although it has never had to use that power.

I can not locate the 2014 Budget as of yet, but this is an interesting find all should read. ~shera
FISCAL YEAR 2013 HISTORICALTABLES BUDGET OF THE U.S. GOVERNMENTOFFICE OF MANAGEMENT AND BUDGET
The FHA does not lend money, but guarantees loans made by banks in exchange for insurance premiums. The agency’s role has expanded since the crash of the subprime mortgage market, and it now insures about $1.1 trillion in loans, according to Inside Mortgage Finance.

thank you Gregory for the article

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