Taxpayers could be left holding the bag for the Federal Housing Administration with a nearly $1 billion bailout for the first time in the agency's history, FHA Commissioner Carol Galante told a Senate Appropriations Committee panel.
President Obama's 2014 budget, submitted at the end of April, requested up to $943 million from the Treasury to cover its required reserves. The agency must have 2 percent in capital reserves to cover losses in its mutual mortgage insurance fund.
The agency has until September 30 to decide if it will need the taxpayer money.
FHA, which insures more than $1 trillion in mortgage loans for mostly first-time and low-income home buyers, is contending with $5 billion in losses from reverse mortgages. That program allows people over 62 to borrow against their home's equity, but FHA ended up paying for defaulted loans after homeowners took out large payments they later couldn't afford, according to the Associated Press.
Galante told the Senate panel her agency may not need the bailout if it sees "significant improvements" in recoveries on defaulted loans, according to AP.
A November audit showed the agency had $16 billion in losses, according to AP, but FHA has recovered some of the money by increasing premiums and revising the troublesome reverse mortgage program.
Michael Conger is a member of The Washington Examiner Watchdog investigative reporting team. She can be reached at firstname.lastname@example.org.