The Federal Housing Administration has reached a "tipping point" in its mission of providing low-cost protection for homebuyers while trying to keep its insurance fund liquid, Commissioner Carol Galante said today.

"As we continue to seek a balance between strengthening the fund and ensuring access to credit we must assess whether FHA premiums are set to appropriately account for risk to the fund without making the cost of credit prohibitive for qualified homebuyers," she told lawmakers today at a U.S. House Financial Services Committee hearing in Washington.

Galante testified before the House panel for the first time since the FHA was forced to take a $1.7 billion draw from the U.S. Treasury amid unprecedented losses on loans it insured. Members of the committee's Republican majority have said the shortfall shows the need for lawmakers to restructure the agency as part of a broader housing-finance overhaul.

The FHA, whose website describes it as the world's largest insurer of mortgages, has increased premiums five times since 2009, most recently on April 1. In September, the agency said it would take the Treasury infusion to shore up the insurance fund, which has been depleted by losses on defaults stemming from the credit crisis.

"While we recognize that the need for a mandatory appropriation is not welcome news to anyone, the fact is that it does not reflect the real-time improvements to the portfolio," Galante said in her testimony. "FHA has been, and continues to be, a reliable steward of taxpayer dollars and a key source of access to homeownership, both for today's families as well as future generations."

With the funds transfer, FHA has more than $48 billion in liquid assets and projections show the agency won't require a subsidy in fiscal year 2014, she said. Still, the need for taxpayer funds for the first time since the agency was formed in 1934 has fueled calls by Republicans to shrink its mission.

"I'm certainly troubled by what this says about the state of FHA," Representative Scott Garrett of New Jersey said at the hearing. "And I'm more than troubled, angered actually, about forcing the American people to rescue yet another failed government-backed housing agency."

Democrats on the committee countered by praising the FHA for its role in the housing market during the financial crisis.

"When the private sector virtually left the market, the Federal Housing Administration stepped up and provided the liquidity that kept our struggling housing market afloat," said Representative Maxine Waters of California, the panel's top Democrat. "This is the countercyclical role of FHA, as it has been throughout the course of its nearly 80-year history."

The FHA insures $1.1 trillion worth of mortgages and backs about 15 percent of U.S. loan originations for home purchases, almost quadruple the 4 percent share it had in 2007.

The agency has raised the amount it charges borrowers to insure mortgages against default and tightened underwriting after an independent actuary predicted last November that the insurance fund would require a $16.3 billion subsidy.

The House Financial Services Committee passed a Republican bill, known as the Path Act, in July that would largely limit FHA coverage to first-time borrowers purchasing moderately priced homes. The Senate Banking Committee in July approved a bipartisan measure that would set a floor on premiums the agency charges and require it to hold more money in reserve.

"The Path Act will achieve needed objectives for the FHA," said Representative Jeb Hensarling, the Texas Republican who leads the House Financial Services Committee. "It will put FHA on sound financial footing and keep it there. It clearly defines FHA's mission to ensure that the agency is serving first-time homebuyers and low-to-moderate-income borrowers."

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