Despite offering “promising signs” that the recovery of the housing market is underway, Secretary of Housing and Urban Development Shaun Donovan came under fire Thursday on Capitol Hill over the poor financial health of the Federal Housing Authority. The beleaguered FHA has suffered billions of dollars in losses, which some fear may portend another bursting of the housing bubble or even the need for a taxpayer bailout. Lawmakers raised concern Thursday that the problem is spiraling out of control. By law, FHA is required to maintain a capital reserve of 2 percent. But a recent audit by the agency projects a negative 1.44 percent capital reserve — meaning the agency’s lending fund stands at a negative $16.3 billion. Donovan argued Thursday that the administration is being careful. But a skeptical Congress is stepping up with its own plan. The House recently passed the FHA Emergency Fiscal Solvency Act which attempts to protect FHA insurance reserves by creating minimum mortgage insurance premiums. It also strengthens FHA internal controls and auditing procedures, and requires any lenders who commit fraud to pay back the FHA for any losses incurred.
– Fox News