ORLANDO — The acting commissioner of the Federal Housing Administration on Wednesday blasted news reports that claim Bank of America Corp. was essentially bailing out the agency's mortgage insurance fund.
B of A's $1 billion settlement with the agency was "not a gift," but rather compensation for past losses, said Carol Galante, the FHA's acting assistant commissioner, at a conference for mortgage servicers hosted by the Mortgage Bankers Association in Orlando, Fla.
The $1 billion payment was announced earlier this month as part of the $26 billion national robo-signing settlement with five major servicers.
Galante, however, did not dispute that the payment will essentially keep the FHA's mortgage insurance fund from going into the red.
The FHA has said it will apply a $750 million payment from B of A that was negotiated as part of the robo-signing settlement to patch a $688 million shortfall in its mortgage insurance fund.
"Yes, the settlement is generating close to $1 billion that will go into FHA's capital reserve," Galante said. "This is not a gift. This is to make sure FHA is compensated for losses."
B of A agreed to the settlement to resolve allegations of "fraudulent and wrongful conduct" in the origination of FHA loans, according to a Justice Department press release.
Galante said the FHA plans to announce additional premium increases in the next week, though it will do so in a way "to have the least impact on borrowers."
The agency is already slated to raise premiums on FHA jumbos by 25 basis points and 10 basis points on lower balance loans, which is reflected in its $9.4 billion fiscal 2013 budget, she said.
The FHA also is expected to announce changes to its streamlined refinance program that may include lowering premiums to get more borrowers to apply.
Galante said lenders have been "reluctant" to sign on to the program because of its higher default rates. The FHA is going to "pull streamlined refinances out of the compare ratios" for its Neighborhood Watch program, which is a closely monitored benchmark in which lenders are compared with their peers.