The U.S. Federal Housing
Administration (FHA) plans to take a series of measures to improve
its financial situation after posting huge deficit in insurance fund
The FHA, a major government mortgage insurer, reported a 16.3- billion-dollar deficit in its insurance fund because of massive defaults on mortgage loans it insured during the housing bubble.
To improve financial condition and avoid seeking government assistance, the agency will increase annual premiums by 10 basis points and sell 10,000 delinquent loans per quarter, said Shaun Donovan, secretary of the Housing and Urban Development (HUD), who said those measures could reduce the possibility that FHA would need to tap into Treasury assistance next September.
The premium increase is designed to guarantee the lender's money will be made whole should borrowers default on mortgage loans.
The FHA, which was established as part of the National Housing Act of 1934 and became part of HUD in the 1960s, provides liquidity to the housing market by insuring lenders against losses on loans with down payments as low as 3.5 percent. Currently, it has 4.8 million insured single family mortgages and 13,000 insured multifamily projects in its portfolio.
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