The Federal Housing Administration will take a taxpayer subsidy for the first time in its 79-year history after efforts to improve its bottom line failed to offset losses on loans backed during the housing bubble, according to three people familiar with the matter. The government mortgage insurer will draw the money from the U.S. Treasury to shore up its insurance fund by Sept. 30, the end of the current fiscal year, said the people who asked not to be identified because the action hasn’t been announced.
Federal budget officials are working to determine the exact size of the cash infusion, the people said. White House officials projected in April that the FHA would need about $1 billion. The agency, which is required to keep enough money on hand to cover all projected future losses, has authority to take the money without prior approval from Congress. The FHA’s need for aid could spur lawmakers to move more quickly to shrink the agency’s risk and its footprint in the mortgage market. Representative Jeb Hensarling, the Texas Republican who leads the House Financial Services Committee, urged swift passage of his bill to largely limit FHA coverage to first-time borrowers purchasing moderately priced homes.
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Source: Bloomberg