“The Federal Housing Administration’s projected losses hit $16.3 billion at the end of September, according to an independent annual audit to be released Friday, a much larger figure than had been forecast earlier.
The report suggests the FHA will require taxpayer funding for the first time in its 78 years, though that won’t be decided until early next year.
Housing officials said late Thursday they would announce a series of steps on Friday to raise revenue and avert such a milestone. Those steps are likely to raise the cost of FHA-backed mortgages for future borrowers.
The FHA is required to maintain enough cash to pay for projected losses on the $1.1 trillion in loans that it guarantees. Last year, the independent audit said the FHA would have $2.6 billion after covering estimated losses.
But the latest forecasts show that while the FHA currently has reserves of $30.4 billion, it expects to lose $46.7 billion on the loans it has guaranteed, resulting in a $16.3 billion deficit.
The report is likely to unleash a political fight over the government’s role backstopping the housing market, which already has required taxpayers to spend $137 billion to rescue Fannie Mae FNMA -0.36% and Freddie Mac FMCC +2.15% . Together with Fannie and Freddie, federal agencies are backing nearly nine in 10 new mortgages.
“If [the FHA] were a private company, it would be declared insolvent and probably put under conservatorship like Fannie and Freddie,” said Thomas Lawler, an independent housing economist in Leesburg, Va.”Comments »