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Beyond the loosened standards on down payments, the FHA remains willing to make loans to people with low credit ratings, even those with histories of default, foreclosure or bankruptcy. Those with histories of default are far more likely to default again.

Even though the number of defaults is escalating, FHA Commissioner David Stevens insists that the $30 billion of insurance reserves will cover any losses and has repeatedly denied that the agency is headed toward a taxpayer bailout. The reserves are replenished by borrowers, who pay the agency yearly premiums of 0.5 percent of the loan and an upfront 1.5 percent payment when their loans close.

But analysts say his optimistic assessment is based on the shaky assumption that the nascent recovery in the housing market will quickly put an end to falling house prices and burgeoning default and foreclosure rates. Many private economists predict that the rates of default will continue to rise even after housing sales recover. They also say home prices may continue to fall for a while longer, leaving increasing numbers of homeowners underwater on their loans and more prone to default.

In another defense of the agency, Mr. Stevens points out that the average credit scores of FHA borrowers has risen in the past year as the disappearance of private home loans sent buyers flocking to the program. But the deep recession also is causing increasing defaults among people with better credit, who cite the loss of income because of layoffs or reduced work hours as their principal reason for not being able to make their mortgage payments.

The FHA has a program that will help people who missed two or three payments under such duress by using the insurance fund to make those payments for them and then recouping the money when the property is sold - a provision that has been used in about 400,000 cases so far and could help to bring down the foreclosure rates on loans that go into default as a result of the recession.

The agency recently announced steps to tighten its standards for lenders to counter concerns about rising defaults as well as criticism from the agency’s inspector general that its program is riddled with fraud and corruption by lenders. The agency proposed requiring lenders, many of whom were subprime dealers, to assume liability for the loans they make and have a net worth of at least $1.25 million.

The agency also is considering tightening standards for borrowers who pose multiple risks, such as those with histories of default. But while the agency has moved quickly to crack down on lender abuses that likely contributed to high default rates, Adam Sharp, a financial adviser and blogger for, said it is perplexing that the FHA has not moved to tighten borrowing standards that have emerged as the lowest in the post-crisis mortgage market.

“I suppose responsible lending would spoil the housing recovery,” he said. “The FHA has effectively replaced subprime lenders who went bust. They’re under pressure to prop up housing prices, and are insuring heaps of risky loans in an effort to do so.”

The FHA’s backers in Congress, led by House Financial Services Committee Chairman Barney Frank, Massachusetts Democrat, maintain that high default rates are the price of Congress’ decision to use the FHA to prevent a complete collapse of the housing and mortgage markets in a time of extreme distress.

“By keeping affordable loans flowing, particularly to the growing ranks of first-time homebuyers, the FHA has been critical to our nation’s economic and housing market recovery,” said U.S. Department of Housing and Urban Development Secretary Shaun Donovan. The FHA is part of HUD.

But even some liberal housing advocates say the FHA’s spectacular expansion could be worrisome.

The agency’s low downpayment requirement “may be workable under some circumstances, but this practice is likely to run into problems in the context of declining house prices and the most severe downturn since the Great Depression,” said Dean Baker, co-director of the Center for Economic and Policy Research.

“Furthermore, given the huge ramp up in its lending in a very short period of time, it seems unlikely that the FHA has been able to adequately scrutinize the loans that it is buying.”

While any bailout of FHA likely would be small in comparison with the gigantic sums spent bailing out Fannie Mae and Freddie Mac, Mr. Baker said, “the crippling of the FHA as a lender would be another blow to the housing market” and would be “a serious political blow to efforts to ensure access to mortgages for moderate-income families.”