Reuters: Regulatory News: US housing official says FHA could avoid need for bailout

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US housing official says FHA could avoid need for bailout Feb 13th 2013, 03:36 By Margaret Chadbourn WASHINGTON | Tue Feb 12, 2013 10:36pm EST WASHINGTON Feb 12 (Reuters) - The U.S. Federal Housing Administration will raise fees and implement other "aggressive measures" so it may not need taxpayer money to cover a projected deficit for the first time in the agency's nearly 80-year history. The mortgage insurer could avoid drawing funds from the U.S. Treasury even if President Barack Obama's budget blueprint due out next month projects the FHA being overwhelmed with losses and short on capital, FHA Commissioner Carol Galante said in remarks prepared for a congressional hearing on Wednesday. The agency does not have an immediate need for cash and will "be diligent in taking every action appropriate to protect taxpayers while continuing to ensure that FHA supports the stabilization of the housing market," Galante said in her testimony to the House of Representatives Financial Services Committee. FHA is raising fees it charges borrowers and tightening credit standards for loans it insures, she said. Those steps will help the agency avoid tapping taxpayer funds and could be enough to offset any losses the White House budget plan shows. "The ultimate need will be borne out in the actual performance of the FHA single-family program over the course of the fiscal year, and will be impacted by the steps FHA takes over the course of the year to increase revenue or reduce losses," Galante said. Whether the FHA will have to turn to the Treasury for aid will ultimately be determined when the agency reassess its books as the fiscal year ends in September. The FHA, a unit of the Department of Housing and Urban Development, provides liquidity to the housing market by insuring lenders against losses on loans. Currently, it backs $1.1 trillion of loans. The series of additional changes FHA is implementing will "reduce the likelihood that FHA will need to draw on Treasury assistance," Galante said. An independent audit released in November projected that the agency's expected losses on its portfolio of insured home mortgages - centered on loans backed between 2007 and 2009 - could lead to a $16.3 billion capital shortfall. The findings renewed calls from lawmakers for an overhaul of the FHA and brought up questions about how to structure the government's overall role in the nation's housing market. Both Democrats and Republicans are concerned about the agency's financial problems. The FHA backs 15 percent of all U.S. mortgages used for home purchases and is a main source of funding for first-time homebuyers and those with modest income. "FHA has played a central role in bringing the housing market from the brink of collapse to a place where the outlook is positive and improving," Galante said. Republicans are looking to narrow the FHA's market share and have placed renewed scrutiny on the agency's finances. Democrats are similarly concerned about the agency's health, but want to ensure any changes to the government's role in housing do not make it harder for borrowers to obtain loans. Galante urged the panel of lawmakers to make progress on providing the FHA with new authority to strengthen its financial footing and protect its business model. Last year, the House passed an FHA bill on a bipartisan basis, but it didn't clear the Senate. That measure would have set a minimum rate for the annual premiums paid for mortgage insurance, allowed the FHA to exclude poorly performing lenders from the program and tightened the agency's oversight of delinquent loans, among other measures. Link this Share this Digg this Email Reprints

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