The Federal Housing Administration will take about $1.7 billion from the U.S. Treasury Department to shore up its insurance fund after losses on defaulted mortgages depleted reserves.
The government mortgage insurer will take the draw on Sept. 30, the last day of the fiscal year, FHA Commissioner Carol Galante said in a letter sent to Congress today. The agency has about $30 billion in liquid assets and needs more because it is required to keep enough money on hand to cover all projected future losses.
“This required mandatory appropriation is an accounting transfer and does not reflect an up-to-date view” of the insurance fund’s “performance, its long-term fiscal health or its current cash position,” Galante wrote in the letter. “In the next few months we expect updated data and economic forecasts to reflect what we already know to be true — the health of the Fund has improved significantly.”
Projections show the FHA won’t require a subsidy in fiscal year 2014. Still, the agency’s need for taxpayer funds for the first time since it was established in 1934 could give ammunition to Republicans in Congress seeking legislation to shrink its mission.
The FHA insures $1.1 trillion worth of mortgages and backs about 15 percent of U.S. loan originations for home purchases, almost quadruple the 4 percent share it had in 2007.
The House Financial Services Committee passed a Republican bill in July that would largely limit FHA coverage to first-time borrowers purchasing moderately priced homes. The Senate Banking Committee in July approved a bipartisan measure that would set a floor on premiums the agency charges and require it to hold more money in reserve.
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