The Federal Housing Administration said Friday that it will hike insurance premiums, accelerate short sales and aggressively sell off defaulted loans to plug a $16.3 billion shortfall in its capital reserves.

FHA Acting Commissioner Carol Galante outlined the series of steps after an independent audit found that the agency's capital reserve ratio — which measures reserves held in excess to cover projected losses — fell into negative territory at, -1.44% at Sept. 30. By law, FHA must maintain at least a 2% capital reserve.

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