Washington, Sep 28 (IANS) The US Federal Housing Administration (FHA), which offers mortgage lenders guarantees against homeowner defaults, would tap $1.7 billion from the US Department of Treasury at the month-end to cover its losses in a mortgage programme.
The agency has about $30 billion in liquid assets on hand and needs more money because it is required by law to keep enough reserves to cover all expected future losses for the next 30 years, reported Xinhua citing FHA Commissioner Carole Galante telling the Senate banking committee in a letter.
The shortfall was mainly driven by $5 billion in losses in the agency's Home Equity Conversion Mortgage programme (HECM), which allows seniors to withdraw equity from their homes, according to the FHA.
This is the first time for the FHA to draw taxpayer funds since it was established in 1934.
But Galante said the required mandatory appropriation did not accurately reflect the health of the agency's finance and updated data and economic forecasts in the next few months would paint a clear picture of the agency's financial position.
The FHA does not make loans, but insures mortgage lenders against losses to support the housing market. It insures $1.1 trillion worth of mortgages and backs about 15 percent of US loan originations for home purchases.