The Federal Housing Administration may need a capital infusion of $943 million in taxpayer funds, housing officials said Wednesday, following the release of the President’s 2014 budget.
The losses stem largely from those sustained as a result of FHA’s reverse mortgage program, Assistant Housing Secretary Carol Galante said in a statement.
“The President’s budget projects that FHA may need a $943 million credit from the U.S. Treasury in October to make certain sufficient reserves are on hand today to cover projected losses over the next 30-years,” Galante said. “This is not a certainty and FHA is taking every appropriate action to reduce the likelihood that such assistance is needed. In fact, were it not for our reverse mortgage portfolio, the budget re-estimate would indicate a positive surplus of over $4 billion at the end of 2013.”
While forward mortgages show a surplus in FHA’s reestimate of reserves of $4.3 billion, the reverse mortgage portion shows a loss of $5.2 billion, resulting in the $943 million shortfall, according to FHA.
An actuarial review of the MMI fund in late 2012 indicated the reverse mortgage fund had a negative $2.8 billion economic value; part of more than $16 billion in negative economic value of the fund overall.
The “bailout” will be the first in the FHA’s 80-year history. It results from projected losses to the FHA’s mutual mortgage insurance fund, stemming from losses on reverse mortgages and forward loans sustained during the housing crisis and marked by continued low home values.
Measures have been taken to help shore up the fund including the suspension of FHA’s fixed rate standard reverse mortgage and insurance premium increases on forward loans. The FHA has requested the authority from Congress to make additional changes toward that same effort.
Written by Elizabeth Ecker