FHA Needs $1.2 Billion to Cover Bad Home Loans

And you get to pay for it!

The U.S. Federal Housing Administration said on Friday it will draw $1.7 billion in cash from the U.S. Treasury to help cover losses from troubled loans, marking the first time in its 79-year history that it has needed aid.

The agency, which offers mortgage lenders guarantees against homeowner defaults, does not have enough cash to cover projected losses on the loans it backs, senior Obama administration officials said. They said the FHA needs the subsidy to shore up its insurance fund by the end of its budget year on Monday in order to maintain a required capital cushion.

While the FHA had been expected to draw from the Treasury, the cash infusion, which Republicans have dubbed a bailout, will heighten the political tension over the government's pervasive role in the mortgage market.