WASHINGTON, March 4 The U.S. Federal Housing
Administration, which turned to the Treasury for aid in 2013,
will avoid that fate this year due to efforts to shore up its
finances, the White House predicted in its budget proposal on
Last year, White House budget writers said the FHA, which is
a major provider of mortgages for first-time homebuyers, would
need a $943 million Treasury subsidy, but the agency ended up
drawing $1.7 billion when the fiscal year closed on Sept. 30.
Now, the Obama administration estimates the agency has
adequate reserves and will not need a second subsidy. Last
year's draw was the first ever in the government mortgage
insurer's 80-year history.
The FHA is required by Congress to keep enough cash on hand
to cover all expected future losses and must take a taxpayer
subsidy if its projected revenue falls short.
To bolster its reserves, the agency has raised the amount it
charges borrowers to insure mortgages against default and
An independent audit, using a separate calculation from
White House budget forecasters, said in December that the FHA's
insurance fund would fall $1.3 billion short in the current
fiscal year. The FHA will not finalize the size of any request
until September, just as the fiscal year is drawing to a close.
Most of the damage to the FHA was caused by loans that were
made during the years the real estate market was cratering, when
it expanded its book of business to support the mortgage market
as private lenders retreated. Loans originated in the past few
years have performed much better.
Republican lawmakers have argued the FHA needs to take more
aggressive action to protect taxpayers, including reducing
maximum loan limits and raising minimum down payments.
The Obama administration contends some of those steps would
undermine the agency's mission to provide credit to first-time
home buyers and needy communities.
The FHA has played a critical role supporting the housing
market by insuring mortgages for borrowers who make down
payments of as little as 3.5 percent. The FHA insures about $1.1
trillion in mortgages and backs about one-third of all new loans
used to purchase homes, up from about 5 percent in 2006.