The Federal Housing Administration (FHA) is said to report later this week that it has exhausted its reserves and might have to resort to taxpayer funds for the first time in 78-years, according to The Wall Street Journal's Nick Timiraos.
The FHA insures lenders against losses but is said to have been hit by rising mortgage delinquencies.
"Overall, the FHA insured nearly 739,000 loans that were 90 days or more past due or in foreclosure at the end of September, an increase of more than 100,000 loans from one year ago. That represents around 9.6% of its $1.08 trillion in mortgages guarantees.
The FHA's annual audit estimates how much money the agency would need to pay off all claims on projected losses, against how much it has in reserves. Last year, that buffer stood at $1.2 billion, representing around 0.12% of its loan guarantees. Federal law requires the agency to stay above a 2% level, which it breached three years ago.
The decision over whether the FHA will need money from Treasury won't be made until next February, when the White House typically releases its annual budget. Because the FHA has what is known as "permanent and indefinite" budget authority, it wouldn't need to ask Congress for funds; it would automatically receive money from the U.S. Treasury."
The Obama administration has previously said that the FHA would only turn to the Treasury in an extreme scenario. Officials are expected to either raise mortgage-insurance premiums or finish up settlements with banks as an alternative.
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