The Federal Housing Administration is expected to report later this week that it could exhaust its reserves because of rising mortgage delinquencies, the Wall Street Journal reported today. That could result in the agency needing to draw on taxpayer funding for the first time in its 78-year history. The FHA's tenuous financial condition would put a spotlight on an often-overlooked housing-market rescue. The agency, which does not actually make loans but instead insures lenders against losses, has played a critical role stabilizing the housing market by backing mortgages of borrowers who make down payments of as little as 3.5 percent—loans that most private lenders will not originate without a government guarantee. The FHA accounted for one third of loans used to purchase homes last year among owner occupants. Already, the Obama administration has taken a series of steps to stabilize the housing sector since the 2008 financial crisis, including $137 billion spent to bail out Fannie Mae and Freddie Mac. Together with those two companies, federal agencies are backing nearly nine in 10 new mortgages. The FHA guarantees fewer mortgages than either Fannie or Freddie, but it now has more seriously delinquent loans than either of the mortgage-finance giants.
