WASHINGTON Feb 12 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
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
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.