FHA chief says no bailout is needed

WASHINGTON, Oct. 8 (UPI) -- Federal Housing Administration Commissioner David Stevens told House members in Washington a fifth of the FHA loans from 2008 are at risk of default.

But Stevens reassured members of the House Subcommittee on Housing and Community Opportunity that the FHA would not need a federal bailout.

"Let me simply state at the outset that based on current projections, absent any catastrophic home price decline, FHA will not need to ask Congress and the American taxpayer for extraordinary assistance -- we will not need a bailout," Stevens said, adding he had "already begun to improve (the FHA's) portfolio and risk management."

The FHA, which insures roughly 5.3 million single-family home mortgages worth $652 billion, has roughly $30 billion in cash reserves as a cushion against defaults, Stevens said. In addition, credit scores among FHA borrowers have improved 9 percent from 2007, Stevens said, The New York Times reported Thursday.

The security of the system is under debate, however.

"It appears destined for a taxpayer bailout in the next 24 to 36 months," said Edward Pinto, a former Federal National Mortgage Association executive.