The Federal Housing Administration, faced with continuing losses from the housing bubble, will issue a financial analysis next week setting the stage for what could be its first draw from the U.S. Treasury in its 78-year history, according to three people briefed on the report.
The government-backed mortgage insurer, which warned in last years report that its insurance fund was being drained, has raised premiums and tightened credit standards in an effort to avoid asking for a taxpayer subsidy.
Still, the improved quality of recent FHA-backed loans — now comprising 15 percent of U.S. mortgages for home purchases — may not offset continuing defaults from loans made from 2005 to 2008, said the people, who spoke on condition of anonymity because the report is not yet final.
The annual report to Congress, based on analysis by an outside actuary, could hamper a White House effort to expand FHAs role as an insurer for underwater borrowers. FHA officials and supporters are preparing to counter the downbeat projections by highlighting how the agency helps the economy.
If FHA alone simply stopped doing business, we would have been propelled down into another double-dip recession, said John Griffiths, an analyst at the Center for American Progress, a research organization aligned with Democrats.
The FHA was established in the wake of the Great Depression to help first-time and low-income Americans buy homes. It provides liquidity to the housing market by insuring lenders against losses on loans with down payments as low as 3.5 percent. Lenders are made whole if the mortgages default. Unlike Fannie Mae and Freddie Mac, the mortgage finance companies under U.S. conservatorship, FHA itself does not package loans into securities or guarantee principal and interest payments.
Coverage Tripled
