US Federal Housing Administration (FHA) said Friday it would tap 1.7 billion dollars from the US Department of Treasury at the end of this month to cover its losses in a mortgage program.
The agency has about 30 billion dollars 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, FHA Commissioner Carole Galante told the Senate banking committee in a letter.
The shortfall was mainly driven by 5 billion dollars in losses in the agency's Home Equity Conversion Mortgage program (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 didn't 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 dollars worth of mortgages and backs about 15 percent of US loan originations for home purchases.