GOP senators press Obama official on FHA losses

WASHINGTON — Republican senators are pressing the U.S. government’s housing official to take steps to shore up the federal agency that insures mortgages for millions of borrowers. An audit shows the agency faces $16.3 billion in losses and might require a taxpayer bailout.

Shaun Donovan, secretary of housing and urban development, said Thursday at a hearing of the Senate Banking Committee that the agency, the Federal Housing Administration, has already taken action to strengthen its finances.

Republican senators said more must be done, such as ending the FHA’s backing of reverse mortgages. They said the FHA has sustained big losses from defaults on those loans, which allow homeowners age 62 or older to borrow against their home’s equity. They also urged reducing the maximum amounts of mortgages that can be insured by the FHA.

The independent audit showed that the FHA’s estimated losses were steeper than earlier projections. High numbers of mortgage defaults triggered by the housing crisis have reduced the agency’s reserve funds, it showed. Mortgages insured by the FHA that were issued in 2007 and 2008 caused a major part of the losses, Donovan said.

There is “clear potential now for a taxpayer bailout,” said Sen. David Vitter, R-La.

The agency has expanded so-called short sales — when a home sells for less than what is owed on the mortgage. And it has raised annual insurance premiums paid by FHA borrowers by an average of $13 a month.

“Based on those steps, I believe we have significantly decreased the chance of having a bailout at the end of 2013,” Donovan said.

But Sen. Richard Shelby of Alabama, the committee’s senior Republican, said the agency must do more.

“It is time for serious reform of the FHA before it needs a taxpayer bailout, if it isn’t too late already.”

Donovan agreed the changes would be helpful. But he said that HUD lacks the legal authority to make those changes in the FHA’s operations and Congress would have to revise the law to make it possible.

More in Herald Business Journal

Health-care consumers need to take the lead, so get smart

David Russian, CEO of Western Washington Medical Group, writes our third essay about fixing health care.

Robots on Wall Street: Slow-footed regulators lose ground

Watchdogs have to figure out how to check computers running lightening-fast algorithms.

More business, more competition for Everett kidney dialysis center

Nonprofit Puget Sound Kidney Centers sees large for-profit competitors enter state market.

Molina Medical holds fall carnival for families in Everett

Molina Medical is hosting a free event for families in the Everett… Continue reading

Leadership Snohomish County celebrates 20 years of service

Leadership Snohomish County is celebrating its 20th anniversary. The organization was launched… Continue reading

Snohomish, Monroe manufacturers honored for innovation, excellence

Two Snohomish County companies have been honored with Manufacturing Excellence awards at… Continue reading

Remodeled home tours planned this weekend

This weekend, Edmonds-based Chermak Construction will participate in the 2017 Remodeled Homes… Continue reading

Barron Heating to celebrate anniversary at Marysville showroom

Barron Heating and Air Conditioning is celebrating its 45th anniversary from 10… Continue reading

US budget deficit hits $666B, an $80B spike for the year

The deficit issue has largely fallen in prominence in Washington in recent years.

Most Read