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The Federal Housing Administration may need a bailout

Foreclosure bank owned house
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The Federal Housing Administration, weighed down by losses on souring loans, will likely need a cash infusion from the U.S. Treasury for the first time in its nearly 80-year history when the current budget year ends, according to sources familiar with the matter.

The agency,which offers private mortgage lenders guarantees against homeowner default, has nearly exhausted its reserves for the mortgages it backs, making it necessary for the government agency to turn to the Treasury Department for a cash injection.

The FHA has never needed to tap the Treasury before because it has been able to take other actions, including raising insurance premiums, to stay solvent.

The White House projected in April that the FHA would face a shortfall of $943 million for the fiscal year that ends on Monday, but the agency said it would wait until the end of the budget year to make a final decision on whether to draw Treasury aid.

—By Reuters

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