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WASHINGTON — The U.S. Senate on Sunday confirmed the head of the Federal Housing Administration in her position despite mounting losses the mortgage funding agency that some fear could eventually lead to a taxpayer bailout.
In a 69-24 vote, the Senate confirmed Carol Galante as an assistant secretary of the Department of Housing and Urban Development. Galante, a former affordable housing developer in San Francisco, had been running the FHA in an acting capacity since July 2011.
The FHA, a key source of mortgage funding for first-time home buyers and those with modest incomes, backs $1.1 trillion in U.S. home mortgages.
Last month it reported a projected shortfall of $16.3 billion due to souring loans that it insured during the housing market downturn during the past several years.
An independent audit suggested that the FHA would require taxpayer funding for the first time in its 78 years, though that won’t be decided until February when the Obama Administration releases its next budget proposal.
In response to the shortfall, the agency raised the premiums it charges on guaranteed loans by one-tenth of a percentage point, adding, on average, about $13 to a borrower’s monthly mortgage payment.
Senator Tim Johnson, the Democrat who heads the Senate Banking Committee, said Galante was “highly qualified” and attributed the FHA’s problems to legacy loans that were still threatening the agency’s finances.
“It is important that the FHA have a confirmed management team in place to continue oversight of these legacy loans,” Johnson said prior to the vote.
Following the collapse of the private subprime mortgage market during the 2007-2009 financial crisis, FHA-backed loans took over as the sole financing source for nearly all of the lower end of the U.S. housing market, which has continued to struggle.
The deteriorated finances had caused some Senate Republicans not to support Galante, who prior to her current position ran multifamily housing programs for HUD.
She joined the agency in 2009 after serving as president of Bridge Housing Corp, the largest non-profit developer of affordable housing in California.
But Republican Senator Bob Corker, who had been one of her biggest critics, publicly dropped his opposition to her confirmation after she sent him a letter pledging to take certain steps to improve the agency’s finances, including tightening lending standards for buyers with lower credit scores and limiting the amount of money that could be borrowed in the FHA’s reverse-mortgage program.