FHA needs money to meet reserve requirement
Sept. 30, 2013 – The Federal Housing Administration told Senate Banking Committee leaders it would draw $1.7 billion from the Treasury Department to comply with the Federal Credit Reform Act’s requirement that credit agencies have enough “reserves to cover one hundred percent of anticipated future losses.”
“This amount is higher than the estimate provided in the President’s budget because of a decline in FHA endorsement volume in the last few months of the fiscal year – consistent with the trend in the broader housing market in response to higher interest rates. It is also consistent with FHA’s goal of reducing its footprint in the market,” FHA wrote in its letter Friday to Chairman Tim Johnson, D-S.D., and Ranking Member Mike Crapo, R-Idaho.
House Financial Services Chairman Jeb Hensarling, R-Texas, issued a statement Thursday that the FHA's situation reinforces the need for H.R. 2767, the “Protecting American Taxpayers and Homeowners Act.”
The FHA is drawing from Treasury because of depleted reserves in its home equity conversion mortgages program. The agency maintains it has $30 billion in liquid assets to pay for default claims. The FHA is required to maintain a minimum of 2 percent of the total amount of mortgages ensured in order to cover projected losses over the next 30 years in its Mutual Mortgage Insurance Fund.
NAFCU has expressed its firm support for the role FHA plays in the housing market and in providing an option for people to obtain a mortgage who could not do so in the conventional mortgage market.