tsai3904
09-27-2013, 10:52 AM
FHA needs $1.7 billion taxpayer subsidy
The Federal Housing Administration must tap $1.7 billion in taxpayer money at the end of the month to cover its losses — a first for an agency that has been self-sustaining since its creation in 1934.
The FHA has played a pivotal role in propping up the housing market by backing low down-payment loans for borrowers after the mortgage market unraveled and other lending sources dried up. It accounts for nearly 20 percent of all home purchase mortgages.
The agency does not make the loans, but insures lenders against losses should loans go bad. It has always used the fees it charges borrowers to cover any losses.
But Friday, the FHA informed Congress that it needs to draw $1.7 billion from the U.S. Treasury — nearly double the amount the White House forecast in April — to shore up its funds and maintain a required cash cushion. In a letter, the agency told lawmakers that the $30 billion it has in its reserves will not be enough to cover all expected losses for the next 30 years.
The shortfall is driven mainly by $5 billion in losses in the agency’s reverse mortgage program, which allows seniors to withdraw equity from their homes. A jump in mortgage rates in June and higher borrowing fees imposed by the agency also cut into FHA’s revenue by slowing demand for the agency’s loans, senior administration officials said.
The letter from FHA Chief Carol Galante said that the draw from the Treasury does not accurately reflect the health of the agency’s finances, and that data to be released in the coming months will show the FHA is on solid financial footing.
More:
http://www.washingtonpost.com/business/economy/fha-needs-17-billion-taxpayer-subsidy/2013/09/27/dd70ef90-276b-11e3-b3e9-d97fb087acd6_story.html
The $1.7 billion bailout does not require Congressional approval as they are required by law to cover expected losses for the next 30 years.
The Federal Housing Administration must tap $1.7 billion in taxpayer money at the end of the month to cover its losses — a first for an agency that has been self-sustaining since its creation in 1934.
The FHA has played a pivotal role in propping up the housing market by backing low down-payment loans for borrowers after the mortgage market unraveled and other lending sources dried up. It accounts for nearly 20 percent of all home purchase mortgages.
The agency does not make the loans, but insures lenders against losses should loans go bad. It has always used the fees it charges borrowers to cover any losses.
But Friday, the FHA informed Congress that it needs to draw $1.7 billion from the U.S. Treasury — nearly double the amount the White House forecast in April — to shore up its funds and maintain a required cash cushion. In a letter, the agency told lawmakers that the $30 billion it has in its reserves will not be enough to cover all expected losses for the next 30 years.
The shortfall is driven mainly by $5 billion in losses in the agency’s reverse mortgage program, which allows seniors to withdraw equity from their homes. A jump in mortgage rates in June and higher borrowing fees imposed by the agency also cut into FHA’s revenue by slowing demand for the agency’s loans, senior administration officials said.
The letter from FHA Chief Carol Galante said that the draw from the Treasury does not accurately reflect the health of the agency’s finances, and that data to be released in the coming months will show the FHA is on solid financial footing.
More:
http://www.washingtonpost.com/business/economy/fha-needs-17-billion-taxpayer-subsidy/2013/09/27/dd70ef90-276b-11e3-b3e9-d97fb087acd6_story.html
The $1.7 billion bailout does not require Congressional approval as they are required by law to cover expected losses for the next 30 years.