The head of the U.S. Federal Housing Administration said on Friday the agency would not need a congressional subsidy even if its capital reserve ratio fell below the 2 percent demanded by Congress.
Even if that level falls below 2 percent, FHA continues to hold more than $30 billion in its reserves today, or more than 5 percent of its insurance in force, FHA Commissioner David Stevens said in a statement. Given this reserve level, FHA will not need a congressional subsidy even if the congressional capital reserve calculation falls below 2 percent.
Mortgage loans insured by the government have soared to the highest levels in two decades as borrowers take advantage of down payment requirements for FHA loans, which are lower than those for other mortgages.
Rising losses at the FHA, an arm of the Department of Housing and Urban Development, raise the possibility the government would have to step in to support the agency or the agency will have to tighten lending standards, analysts say.
The Wall Street Journal on Friday reported that government officials believed the FHA, which provides government guarantees on mortgages for some home buyers, was in danger of seeing its reserves fall below the 2 percent level.
In his statement responding to the article, Stevens noted the mandated FHA reserve ratio measures excess reserves above and beyond projected losses of the next 30 years.
FHA's full faith and credit insurance means that there is no risk to homeowners or bondholders independent of the congressional capital reserve requirement, Stevens said, adding that FHA continued to generate income for taxpayers.
(Reporting by Tim Ahmann; Editing by Neil Stempleman)