For the first time in its 79-year history, the Federal Housing Agency (FHA) announced on Friday the need for a $1.7 billion bailout from the Treasury to cover losses on its reverse home mortgage programs.
FHA Commissioner Carole Galante said in a letter to Congress that the FHA will withdraw the money from the Treasury by Monday when the fiscal year ends. Galante does not need congressional approval to tap the funds.
“In the next few months, we expect updated data and economic forecasts to reflect what we already know to be true–the health of the fund has improved significantly,” wrote Galante.
Republicans say the FHA helped fuel the housing crisis and should undergo immediate reform.
“The FHA is clearly headed toward financial disaster and taking taxpayers along for the ride,” said House Financial Services Committee Chairman Rep. Jeb Hensarling (R-TX). “Unless Congress enacts sustainable housing finance reform, it’s possible taxpayers will be forced to write blank bailout checks to the FHA indefinitely. That is unacceptable.”
The $1.7 billion bailout is just the latest in a long string of FHA failures. In June, the FHA failed to disclose an internal stress test that revealed the agency’s projected losses over 30 years could be up to $115 billion under severe economic conditions, a figure over $100 billion higher than the $13.5 billion projection the FHA included in its annual audit.
Last year, one out of every four homes with negative equity (“underwater”) were borrowers with FHA-insured loans.