For the first time in its nearly 80-year history, the Federal Housing Administration will need a taxpayer subsidy, after it failed to make up for losses on loans it backed during the housing bubble.
The government mortgage insurer will draw money from the U.S. Treasury to buttress its insurance fund by the end of this month. Budget officials are currently working to figure out how much of a cash infusion the FHA will need.
In April, the White House projected the amount at around $1 billion, sources told Bloomberg News.
The FHA’s current situation could propel lawmakers to move to shrink the agency’s presence in the mortgage market, Bloomberg News said. U.S. Congressman Jeb Hensarling, a Texas Republican who leads the House Financial Services Committee, asked for the speedy passage of a bill intended to limit FHA coverage to first-time borrowers buying moderately-priced homes.
“Over the years, the FHA has strayed far from its original mission,” Hensarling said Wednesday in a statement to Bloomberg News. “It has become the nation’s largest subprime lender.” [Bloomberg News] – Hiten Samtani