FHA Faces Shortfall From Mortgage Losses
STEVE INSKEEP, HOST:
NPR's business news starts with more mortgage problems.
(SOUNDBITE OF MUSIC)
INSKEEP: Independent auditors released a report this morning, showing that the Federal Housing Administration is facing a shortfall from losses on the mortgages it insures. The Obama administration says it's going to take steps to prevent a taxpayer bailout.
As NPR's Ailsa Chang reports, the FHA has been struggling since the foreclosure crisis hit four years ago.
AILSA CHANG, BYLINE: The agency has a trillion dollars of mortgages on its books. It swooped in after the mortgage crisis and backed loans for people who could only make small down payments, as low as three and a half percent.
Guy Cecala, a mortgage analyst, says that helped revive the housing market.
GUY CECALA: If you want to avoid all losses, you're going to have a very rigid program that's going to favor higher income white borrowers, and I'm not sure that's the public policy choice any administration wants to make.
CHANG: And if there's a policy interest in getting poorer home buyers into the market, Cecala says any money the federal government has to spend to help the FHA is just a cost of that goal.
A decision about whether the FHA will need a bailout won't come until February, when the White House releases its budget. Chris Mayer of Columbia Business School says, by then, the FHA may be in better shape.
CHRIS MAYER: The FHA is currently making profitable loans, higher quality loans to higher quality borrowers, and those loans are going to help the FHA, over time, start to earn its way out of the past losses they have.
CHANG: Federal agencies are now backing about 90 percent of all new mortgages.
Ailsa Chang, NPR News. Transcript provided by NPR, Copyright NPR.