WASHINGTON Nov 15 The U.S. Federal Housing
Administration's capital is inadequate to cover its expected
losses, an audit has found, and the agency will likely need
taxpayer funding for the first time in its 78-year history, the
Wall Street Journal reported on Thursday.
The Journal said the annual audit had found that the agency,
which insures about one-third of all U.S. mortgages, faced a
deficit of $13.5 billion at the end of September.
The findings, which were scheduled for release on Friday,
are likely to add further fuel to a long-standing debate on the
government's role in supporting the housing market.
Fannie Mae and Freddie Mac, the mortgage
finance firms the government seized in 2008, have soaked up
almost $190 billion in taxpayer funds.
An audit by an outside firm last year found the FHA, which
is a primary source of funding for first-time home buyers and
those with modest incomes, faced a nearly 50 percent chance of
needing a taxpayer bailout. The FHA avoided one earlier this
year because it received an almost $1 billion payment from a
U.S. settlement with mortgage servicers on claims of lending
But critics of the agency have warned that taxpayers could
soon be on the hook if losses continued to mount. FHA's cash
reserves fell to a record low of $2.6 billion last year.
The agency is legally required to keep a 2 percent capital
ratio, which is a measure of the fund's ability to withstand
losses. It has failed to meet that target for three straight
The annual analysis is supposed to calculate the solvency of
the FHA's mortgage insurance fund under a range of economic