Hammered by the need to cover defaulted mortgages it insured, the Federal Housing Administration could exhaust its reserves over the coming year, according to an Office of Management and Budget report.
If the agency has to ask for money, it would be the first time in its 78-year history.
The FHA said that money it expects to get from last week's settlement between states and five large banks that bundled and sold residential mortgage securities would eliminate the problem. OMB agreed the settlement made things different, telling The Wall Street Journal that the report was "no longer accurate" as a result of last week's action.
However, FHA is supposed to keep a 2% of its primary account in a backup fund, and it stands below that now and could run it to zero to support the primary account, the OMB report said.
Congress has ordered an increase in the cost of FHA insurance. The OMB report, the Journal said, calculated that the reserve account would be in the black by October 2013 and could build up to the mandatory 2% reserve level by 2015.
Even if the FHA runs out its funds, howere, it cannot go bust. It has what amounts to an unlimited line of credit with the Treasury.
