U.S. Department of Housing and Urban Development Secretary Shaun Donovan told the Senate Banking, Housing and Urban Affairs Committee Dec. 6 that he is working to prevent the Federal Housing Administration from having to make a draw from the U.S. Department of the Treasury in 2013, HousingWire reported.

The FHA reported Nov. 14 that it has a $16.3 billion shortfall, but the actuarial report that Donovan presented to the Senate noted that that shortfall does not necessarily mean the agency will need a bailout.

HUD projected that $60 billion in claims from seriously delinquent FHA-backed loans issued between 2007-09 will be filed by the end of 2014. However, Donovan said he hoped that his agency can reduce loses on those loans by pumping up bulk sales of distressed properties. FHA announced that it would unload 40,000 such properties in 2013.

FHA also is working to provide better loan modification options to distressed borrowers in hopes of reducing mortgage payments an average 20 percent through Home Affordable Modification Program refinancings.

“This approach will yield lower claims costs for FHA while also reducing prepayment speeds for insured loans, both of which will positively impact that MMI fund,” Donovan told the committee, HousingWire reported.

Donovan also said that the FHA planned to offer a streamlined pre-foreclosure sale policy to remove obstacles that prevent borrowers from obtaining short sales on FHA-insured mortgages, thus reducing foreclosures. HousingWire reported that the agency currently is engaged in a pilot program that allowed lenders who completed foreclosure processes on FHA-insured mortgages to sell properties to third-party purchasers without being conveyed to FHA.

Donovan said the procedure should reduce carrying costs associated with managing and marketing the homes.