The head of the U.S. Department of Housing and Urban Development (HUD) has stated that the challenges facing the Federal Housing Administration (FHA) – including the possibility of a draw from the U.S. Department of the Treasury – are, for the moment, under control.
According to combined media reports, HUD Secretary Shaun Donovan, speaking before a Senate Banking Committee hearing yesterday, stressed that the White House made the FHA's well-being a priority.
‘We will continue, as we have throughout this administration, to be diligent in taking every action appropriate to protect taxpayers while continuing to ensure that FHA supports the stabilization of the housing market,’ Donovan said.
Donovan addressed the recent news that the FHA Mutual Mortgage Insurance Fund dipped below zero percent, adding that he was uncertain whether the fund would need the Treasury's help to remain operational.
‘I cannot guarantee that FHA will not need a draw before the end of this fiscal year,’ Donovan said. ‘I'm highly concerned about that possibility.’
Donovan also warned that attempts to tighten FHA standards for insuring mortgages could lead to an increase in foreclosures and stall the economic recovery.
‘We are seeing a recovery, but it is still fragile,’ Donovan said. ‘We don't want to hurt the market and, in turn, the FHA fund, by going too far and stopping that recovery.’
The committee's ranking Republican, Alabama Sen. Richard Shelby, expressed skepticism over the FHA's well-being, using a certain ‘B-word’ that Donovan did not include in his remarks.
‘It is time for serious reform of the FHA before it needs a taxpayer bailout, if it isn't too late already,’ Shelby said.