The Federal Housing Administration Budget Shortfall

Until 2008, Federal Housing Administration was the only government agency that operated entirely from self-generated income, but for the first time in three decades HUD made a request to Congress for a taxpayer assistance with HUD projecting a budget shortfall stemming from FHA.

The FHA is a United States government agency created by Congress in 1934. The United States was in the middle of the Great Depression, a decade of high unemployment, poverty, deflation, and a severe decline in home loans and home ownership. The FHA was created to improve housing standards, to provide a functioning home mortgage system, and to help stabilize the residential mortgage market. Throughout its long history, the FHA has helped build homeownership -- from financing military housing for returning World War II veterans to acting as a stabilizing force on home prices during the recessions of the 1970s and 80s. Today, it is the largest insurer of mortgages in the world.

In recent days, FHA has significantly increased its mortgage relief efforts by helping at-risk borrowers avoid foreclosure with its loan modification programs, such as FHASecure which gives homeowners with adjustable rate mortgages the ability to refinance into an FHA-insured mortgage. HUD should profitability as more homeowners leave adjustable rate mortgages for FHA-back loans.

All FHA loans are issued by federally qualified lenders and insured by the Federal Housing Administration. FHA primarily serves home-buyers who cannot afford a standard down payment or do not qualify for private mortgage insurance. The American Recovery and Reinvestment Act of 2009 reinstates 2008 loan limits for FHA, Freddie Mac, and Fannie Mae loans.