F.H.A. Could See Deficit for First Time This Year

Washington, D.C—The Federal Housing Administration is supposed to help hundreds of thousands of homeowners refinance subprime loans to more secure government-backed mortgages—but the F.H.A. is dealing with its own financial troubles.Because of a quickly growing section of its mortgage portfolio–the seller-financed down payment loan program–the agency will see a deficit for the first time in its 74-year run in 2008, according to the New York Times. A home seller uses financial assistance from a nonprofit company to pay the buyer’s down payment under the program, and then adds that amount—or more—to the house price. It helped struggling buyers afford homes and enabled sellers in downtrodden housing markets to make sales.Seller-financed down payment loans were 2 percent of F.H.A.-insured loans in 2000; by last year, they comprised 35 percent of all F.H.A. loans. The program could result in a $1.4 billion F.H.A. deficit in fiscal 2009—which would mean for the first time, Congress and taxpayers would need to help fund the agency.Officials plan to prevent the F.H.A.’s potential shortfall by adding legislation to prevent seller down payments and by enacting higher premiums for homeowners, which would make the loans more expensive.