The Federal Housing Administration has been hurt by mortgage defaults, and could need a bailout similar to ones provided to Freddie Mac and Fannie Mae.
The Federal Housing Administration, which guarantees mortgages for millions of homeowners, may need a bailout from taxpayers, experts said.
The agency, stretched to the breaking point by hundreds of thousands of defaults, is dangerously close to the fate that befell Fannie Mae and Freddie Mac at the onset of the financial meltdown, reported the The New York Times.
"It appears destined for a taxpayer bailout in the next 24 to 36 months," Edward Pinto, a former Fannie Mae executive told a House subcommittee. Pinto told lawmakers soured mortgages could quickly wipe out the agency's $30 billion in cash reserves, requiring the Treasury Department to provide a lifeline.
Since rescuing Fannie Mae and Freddie Mac, the Treasury has paid out $96 billion to guarantee defaulted loans, and there may be more to come.
FHA Commissioner David Stevens assured the same subcommittee that the mortgage giant will not need a bailout "absent any catastrophic home price decline," and that it was managing risks. However, Steven did offer a preview of the agency's financial audit, acknowledging that as many as 24 percent of loans made since 2007 face possible foreclosure. There are currently 410,916 FHA-backed mortgages in default, up 76 percent from a year ago.
Get more: MSNBC