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Report: FHA to Seek Treasury Draw

*_[Updated to include a statement from the Center for Responsible Lending.]_*

Despite efforts to shore up its insurance fund, the ""Federal Housing Administration"":http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/fhahistory (FHA) is ""likely"" to seek a Treasury draw of nearly $1 billion to help cover losses from bad loans.

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""Sources familiar with the matter"" told ""_Reuters_"":http://www.reuters.com/article/2013/09/25/usa-housing-bailout-idUSL2N0HL23020130925 Wednesday the agency may need to take a bailout for the first time in its history. While no definitive numbers were given, the White House ""predicted in its budget"":https://themreport.com/articles/obama-administration-budget-includes-potential-fha-bailout-2013-04-10 earlier this year that FHA may need up to $943 million.

A spokesperson for HUD did not immediately return a request for comment.

FHA's financial troubles came to light ""last year"":https://themreport.com/articles/drop-in-fha-insurance-fund-sparks-talk-of-treasury-draw-2012-11-16, when an actuarial report revealed that losses on vintage loans from 2005-2008--from the height of the bubble to about the time it burst--had brought the government insurer's capital ratio to -1.44 percent, well below the required 2 percent ratio required for its insurance fund.

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Since then, HUD officials have worked to reform FHA's practices and strengthen its financial standing, while policymakers in the Senate have ""done the same"":https://themreport.com/articles/senate-banking-committee-passes-fha-solvency-act-2013-07-31.

Conservative lawmakers were quick to denounce the possible bailout, with ""Sen. David Vitter"":http://www.vitter.senate.gov/ (R-Louisiana) one of the most vocal.

""I'm not one to say 'I told you so,' but geez. The FHA has been going down an irresponsible path for years, from their drastic lack of required capital to secret stress tests,"" Vitter said. ""Instead of making their funds responsibly, and making appropriate reforms, FHA prefers to lean on taxpayers to bail them out, and enough is enough.""

Vitter went on to call for the Senate to take up measures to further reform the agency and protect taxpayers ""against [FHA's] mismanagement."" The senator's suggested reforms include an early term delinquency review, a lifetime ban on additional FHA-backed loans for borrowers with two foreclosures, and a capital reserve requirement for its new multifamily program.

On the other hand, FHA's defenders lay the blame at the feet of the same lawmakers that criticized the agency.

├â┬ó├óÔÇÜ┬¼├àÔÇ£The proposed draw from the U.S. Treasury Department would not have been needed if Congress had not prevented FHA from clamping down on fraudulent seller-funded down payment loans, as it tried to do,├â┬ó├óÔÇÜ┬¼├é┬Ø the ""Center for Responsible Lending"":http://www.responsiblelending.org/ (CRL) said in a statement, noting that recent increases in pricing and tighter underwriting standards--ideas implemented by FHA itself--have ├â┬ó├óÔÇÜ┬¼├àÔÇ£led recent loans to perform extremely well.├â┬ó├óÔÇÜ┬¼├é┬Ø

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