On the heels of the disclosure that the Federal Housing Administration’s (FHA) mutual mortgage insurance (MMI) fund may dip below the Congressional-mandated 2% capital reserve threshold, some are warning the FHA may need a taxpayer bailout to stay afloat. But FHA commissioner David Stevens, appearing before a House Financial Services subcommittee, discounted those claims and said the fund can return to required levels without intervention within three years. During a Subcommittee on Housing and Community Opportunity hearing Thursday, Stevens said the independent, non-governmental actuarial review of the MMI fund is based on conservative estimates for the future of the housing market’s recovery. While the capital reserve account (the account that’s required to stay at or above 2%) may dip below the required level, he indicated the total FHA reserve is projected to be higher than its ever been. “Let me simply state at the outset that based on current projections, absent any further catastrophic home price decline, FHA will not need to ask Congress and the American taxpayer for extraordinary assistance – we will not need a bailout,” Stevens told the subcommittee. New business is coming in to the FHA at record levels, and with stricter underwriting, Stevens said. As the new business continues to build, it will outpace the poor quality loans from 2007 and 2008. But other witnesses seemed less optimistic. Edward Pinto, the former chief credit officer at Fannie Mae (FNM), projected a far worse scenario for FHA. In his written testimony for the committee, Pinto said FHA “appears destined for a taxpayer bailout in the next 24-36 months.” During questioning, Stevens addressed the impact of the increase to the conforming loan limit for high-cost markets. While loans more than $417,000 represent only 2% of FHA’s portfolio, Stevens said in California, FHA loans make up 13% of these mortgages, helping qualified homeowners obtain financing for more expensive homes. A representative from the National Association of Realtors (NAR) also called for making the loan limit increase permanent. “In today’s real estate market, lowering the loan limits further restricts liquidity and makes mortgages more expensive for households nationwide," said Boyd Campbell, a NAR spokesperson and managing partner-associate broker of Century 21 in Lanham, Md. "FHA and GSE mortgages together continue to constitute the vast majority of home financing availability today, which makes it particularly critical to extend the current limits.” Write to Austin Kilgore.