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Lending

Will the FHA need another bailout?

FHA poised to operate without taxpayer subsidy

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The Federal Housing Administration begins 2014, and going into the fiscal year 2015, on more solid financial footing, according to the latest projections from the White House, and it doesn’t believe it will need taxpayer subsidy to deal with losses from defaulted loans.

For fiscal 2014, the FHA received $1.7 billion from the U.S. Treasury, the first time the agency has been subsidized in its eight decades of existence. FHA insures almost $1.1 trillion in mortgages, backing about 17% of all mortgage app originations.

A White House budget proposal unveiled Tuesday asks Congress to grant the housing agency, which is under the aegis of the U.S. Department of Housing and Urban Development, more authority to regulate and punish bad lenders. Further, it wants the FHA to require mortgage servicers to hire outside help if they have a poor track record of aiding delinquent borrowers.

HUD is pursuing a comprehensive legislative package to give FHA more tools to build upon the many administrative steps it has taken since 2009 to strengthen FHA Single Family Programs.

“These items will allow FHA to enhance enforcement, create certainty for FHA approved lenders, and enhance loss mitigation opportunities for borrowers with FHA approved loans,” the budget proposal states.

One item of contention – the FHA’s insurance fund came up $1.7 billion shy in fiscal 2013, which it received from the Treasury. The agency has until the end of fiscal 2014 to determine if it needs additional taxpayer help.

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