FHA Faces $16B Shortfall

November 16, 2012

The Federal Housing Administration is facing a $16.3 billion shortfall and is taking steps to mitigate losses, according to an independent audit released Friday.

The agency says home prices have not risen as quickly as they forecasted, and low interest rates have caused less return as well. A high number of mortgage delinquencies from the real estate bubble has also caused the agency to come up short. 

“We will continue to take aggressive steps to protect FHA’s financial health while ensuring that the FHA continues to perform its historic role of providing access to home ownership for underserved communities and supporting the housing market during tough economic times,” says Carol J. Galante, FHA’s acting commissioner.

The FHA says it has seen improvement lately with its portfolio. But a large number of loans insured between 2007 and 2009 that became delinquent have caused an estimated $70 billion in losses alone, proving to be “significant” strain on FHA’s finances. 

Source: “FHA Will Boost Premiums, Sell Mortgages to Improve Finances,” Bloomberg (Nov. 16, 2012)