FHA Reverse Mortgage Losses May Require Bailout

ANDREW MIGA | Associated Press

WASHINGTON (AP) – The head of the Federal Housing Administration says her agency may need as much as a $1 billion rescue package to bolster its reserves despite efforts to shore up its finances with higher mortgage insurance premiums.

FHA Commissioner Carol Galante told a Senate committee on Tuesday that her agency, which insures some 40 million home mortgages, is struggling with more than $5 billion in losses on reverse mortgages this year. Galante says the FHA played a crucial role in bringing the housing market back from the brink of collapse, but at a heavy financial price to itself.

The FHA is required by law to maintain reserves equal to 2 percent of the total amount of home mortgages it insures. It currently has about $32 billion in reserves.

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