FHA won’t need a bailout despite dwindling reserves: FHA Chief

In order to reduce the risk of future losses and strengthen its reserve fund the Federal Housing Agency announces a series of policy changes.

A federal agency about which it is supposed that it help the housing market to recover from the financial crisis, is itself taking steps to avoid becoming a victim.


FHA reserves are set to fall below the legally mandated level

It has been announced by The Federal Housing Administration, which insures mortgages, on Friday that its reserves are set to fall below the legally mandated level. The agency is fully funded through fees that is paid by homeowners who have FHA-backed loans, and by the continued tide of foreclosures that money is endangered.

FHA announces a series of policy changes

But it has been said by FHA Commissioner David H. Stevens that there was no need for the government to pump money into the agency for the first time.

Instead of that, in order to reduce its risk of future losses he has announced a series of policy changes that will be enough to strengthen the reserve fund.

It has been said by Stevens that there will be no taxpayer bailout. He further emphasized that the fund in question is a secondary reserve and in two years it is projected to return to its required level without any changes by the FHA. FHA

The Mortgage Bankers Assn said, FHA has exposed to greater risk

The Mortgage Bankers Assn. said that the FHA has been exposed to greater risk due to the increased volume. For the second quarter, the percentage of FHA-backed loans at least 90 days overdue or in foreclosure was 7.78%, which has raised up from 5.43% a year earlier.

Stevens said that it has been projected by the actuarial study projects that the secondary fund is going to rise back to its mandated level within two years as the housing market recovers.

FHA is required by law to take steps

He further said that however the FHA is required by law to take steps in order to raise the reserve, and it can be difficult to project the future of the volatile housing market . In fact, due to the reason that the market is not bottoming out this year as predicted the secondary reserve has been drained. The study has projected that the market will continue to decline into the first three months of 2010.

Stevens said that on Friday some of the actions taken were aimed at reducing fraud.

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