Word has gone out to every village and town that the FHA is in trouble. Very soon taxpayer dollars may be needed to bail out the venerable mortgage insurance program, which makes home ownership accessible to so many people through FHA home loans.

The very thought of using taxpayer funds to support a federal housing program is philosophically offensive to those who believe the government should provide little more than postage stamps and coastal defenses. Others are using current FHA troubles as a pretext to shrink the size of the FHA, something they have been unable to do with open competition and better loan products.

The basic issue with the FHA is fairly simple. The FHA is an insurance program. It loans no money but it protects lenders when borrowers do not make their loan payments. When borrowers get an FHA loan, they only need to have a 3.5% down payment -- the FHA promise to cover the debt is both believable and proven.

The FHA Double Standard

The money collected for the mortgage insurance premium – or MIP – goes into a reserve fund. Given the fact that home values are now 15% lower than they were in April 2007, it is not a surprise that the FHA reserve fund is shrinking. Depending on who you ask, the reserve fund is either on the verge of insolvency, headed toward insolvency or simply broke.

So now, for the first time since the FHA’s inception during the 1930s, the Treasury Department might have to step in and provide some backup funding.

Let's imagine that federal funding is required. Is this a big deal?

When Hurricane Sandy hit the East Coast, the federal government provided $60 billion in assistance. Although a few people complained that such spending was somehow inappropriate, most understood that helping a battered section of the economy is the job of the federal government. It's what the government does following hurricanes, floods, earthquakes, fires and other natural disasters.

Certainly, the federal government has been there to protect the privately-owned national banking system, which has required trillions of dollars in assistance. This assistance has taken the form of the ZIRP -- the "zero interest rate policy" followed by the Fed – as well as massive purchases of mortgage-backed securities. And in addition, there have been hundreds of billions of dollars in cash bailouts and debt guarantees extended to individual Wall Street banks.

Why is the case for the FHA any less compelling than the need to assist victims of Hurricane Sandy, communities hit by a tornado or impoverished bankers on Wall Street?

Recent FHA Profits

FHA originations between 2000 and 2009 lost money every year and nobody said a word. FHA operations were profitable before this period and they were profitable after -- in fact, $20 billion has been added to FHA reserves during the current administration, but from the current "debate" no one would ever know that.

The FHA is on the right track, so here's a reform idea: let's leave it alone, give assistance if needed, and be grateful that it was in place to bail out the housing sector when other mortgage sources left the market.

This post was created for LendingTree by Peter G. Miller. It is original content and has bot been published anywhere else.