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The Federal Housing Administration's (FHA) projected losses hit $16.3 billion at the end of September, according to an independent annual audit to be released today, the Wall Street Journal reported. The report suggests that the FHA will require taxpayer funding for the first time in its 78 years, though that won't be decided until early next year. Housing officials said yesterday that they would announce a series of steps on Friday to raise revenue and avert such a milestone. Those steps are likely to raise the cost of FHA-backed mortgages for future borrowers. The FHA is required to maintain enough cash to pay for projected losses on the $1.1 trillion in loans that it guarantees. Last year, the independent audit said the FHA would have $2.6 billion after covering estimated losses.

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.

Bank of America Corp., the second- biggest U.S. lender by assets, was sued by investors over $261.2 million worth of residential mortgage-backed securities, Bloomberg News reported yesterday. The case was filed on Tuesday in the New York State Supreme Court in Manhattan by investors including Phoenix Light SF Ltd. They asked for damages of more than $122.2 million from defendants including the Charlotte, N.C.-based lender and its Countrywide unit. The investors said they relied on offering materials that misrepresented and omitted statistical characteristics of the loans underlying the securities, including the percentage of properties that were occupied by owners.

JPMorgan Chase & Co. has an "agreement in principle" to settle an investigation into how its Bear Stearns unit handled mortgage securities it packaged and sold to investors, and plans to resume a $3 billion stock buyback in the first quarter of 2013, the bank said in its third-quarter filing with the U.S. Securities and Exchange Commission, the Wall Street Journal reported today. The mortgage case involves whether Bear Stearns, which JPMorgan acquired at the onset of the financial crisis in 2008, received compensation from lenders for bad loans that it purchased to bundle into mortgage securities, but then failed to pass that money on to the investors in the securities.

Bank of America Corp.'s Merrill Lynch & Co. unit must face a lawsuit by the Federal Housing Finance Agency (FHFA), the conservator for Fannie Mae and Freddie Mac, over mortgage-backed securities sold by the investment bank, Bloomberg News reported today. U.S. District Judge Denise Cote yesterday denied Merrill’s request to dismiss the FHFA's securities law and fraud claims, except for fraud claims based on loan-to-value ratios and ownership-occupancy reporting. The judge said that FHFA had failed to sufficiently allege fraudulent intent for those claims. The judge rejected Merrill Lynch’s request to throw out the FHFA's claims for recession and for punitive damages.

Bakers Footwear Group Inc . wants to kick off a sale process for leases at 151 stores where it is poised to liquidate its merchandise, Dow Jones DBR Small Cap reported today. The shoe store chain on Tuesday debuted a proposed "two-step process," which would first involve sealed bids and then move to an open auction, as it seeks to dispose of the leases.

Citigroup Inc., the third-biggest U.S. bank by assets, was sued by Sealink Funding Ltd. for damages tied to an investment in $513 million worth of residential mortgage-backed securities, Bloomberg News reported today. Sealink, in a suit filed yesterday in New York State Supreme Court, accused Citigroup of misrepresenting and omitting information on the underwriting standards used to issue loans pooled to create the securities. Sealink is seeking more than the principal amount of the securities in damages.

JPMorgan Chase & Co. is close to a settlement with the Securities and Exchange Commission that would end one probe into how the company's Bear Stearns Cos. unit packaged and sold home loans to investors, the Wall Street Journal reported today. A pact with the nation's largest bank by assets would be the first tangible victory in a wide-ranging SEC investigation into Wall Street's sale of mortgage-backed securities before the onset of the financial crisis. JPMorgan's payment is not expected to exceed the $550 million paid in 2010 by Goldman Sachs Group Inc. to settle claims by the SEC that it misled investors in a collateralized debt obligation called Abacus 2007-AC1.

Wells Fargo & Co., the home lender that agreed to refinance mortgages after a probe of the industry’s practices, may forgo as much as $2 billion in interest, $300 million more than previously estimated, Bloomberg News reported yesterday. The lost interest may range from $1.8 billion to $2 billion in future years, or $181 million to $201 million annually, San Francisco-based Wells Fargo said today in its quarterly regulatory filing. As many as 36,000 borrowers may get their interest rates cut, according to the filing. Wells Fargo, the biggest U.S. home lender, had estimated in August that 40,000 might be covered. The program is part of a $25 billion mortgage settlement in February by five banks with 49 states and the federal government.

JPMorgan Chase & Co. lost a bid to have a U.S. judge dismiss lawsuits filed by the Federal Housing Finance Agency against 16 U.S. banks over mortgage-backed securities, Bloomberg News reported yesterday. JPMorgan, Bank of America Corp. and Citigroup Inc. were among the lenders sued last year for allegedly misleading Fannie Mae and Freddie Mac about the soundness of loans underlying billions of dollars of residential mortgage-backed securities. JPMorgan served as the lead underwriter for 30 out of the 103 securitizations at issue in this case. U.S. District Judge Denise Cote yesterday rejected a bid to throw out the FHFA's complaint, overruling arguments that the agency lacked factual support that the loans underlying the securitizations were not underwritten in accordance with the guidelines set out in the offering documents.