Surging U.S. home prices could help shrink the Federal Housing Administration's (FHA) projected shortfall in President Barack Obama's budget plan, which will be submitted Wednesday, Bloomberg reported.
Democratic and Republican lawmakers have been pushing for changes at the FHA since a November actuarial report said its reserve fund for bad loans could require a taxpayer subsidy of as much as $16.3 billion in fiscal year 2013, the first time in the agency's 79-year history that it wouldn't be self-supporting.
The new assessment by White House budget staff may show some improvement because the turnaround in the housing market will shrink the losses FHA suffers on defaulted loans. The agency also has raised fees and tightened standards for new loans. Still, those factors probably won't fully offset the damage caused by mortgages the agency backed during the years of the real estate crash. Read more.