The Real Deal New York

FHA at risk as capital reserves dwindle

February 28, 2012 04:30PM

The Federal Housing Administration continues to experience “considerable risks” to its finances, and the Obama administration will continue to minimize the FHA’s exposure in the mortgage market, Reuters reported.

To create a more “robust private system of housing finance and protect the FHA fund for the future” the government must scale back the FHA’s mortgage presence, Housing and Urban Development Secretary Shaun Donovan told Congress today, according to Reuters.

The agency’s capital reserves have dwindled to $2.6 billion in the wake of the financial crisis of 2008. The FHA currently backs about one-third of new home loans in the U.S., up from around 5 percent before the crisis, Reuters said. Yesterday, the agency said it will increase origination fees to help increase its cash flow. [Reuters]