Money / Federal Housing Administration The Next Mortgage Lender Bailout: The FHA Critics think fallback agency will need a rescue in next couple of years By Kevin Spak, Newser Staff Posted Oct 9, 2009 8:38 AM CDT Copied In this photo made April 24, 2009, Lorrin Montag, 65, and his wife, Dianna, 61 pose for a picture at their home in Corona, Calif. The unemployed Montags are hoping for FHA loan modification help. (AP Photo/Chris Carlson) Another mortgage lender specializing in low income borrowers is in trouble: the Federal Housing Administration. The agency which oversees Fannie Mae and Freddie Mac could soon share their fate, as borrowers default on the low-downpayment mortgages it insures, critics told a House subcommittee yesterday. “It appears destined for a taxpayer bailout in the next 24 to 36 months,” said an ex-Fannie Mae executive. The agency’s commissioner insisted that isn’t the case, saying the agency is managing its risks well, but he did acknowledge that roughly 20% of its loans went belly-up last year. The issue has split Congress; with Republicans want to rein in the agency, but with private lending virtually non-existent, Democrats say the FHA is too vital. “Let’s be clear,” said Maxine Waters, “Without the FHA, there would be no mortgage market right now.” (More Federal Housing Administration stories.) Report an error