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The Federal Housing Administration, the government agency whose loan-insurance programs have become a crucial source of support for the housing market, said Thursday that its cash reserves had dwindled significantly in the last year as more borrowers defaulted on their mortgages.

The agency released an audit that spelled out the rapid deterioration of its finances. It is tightening loan standards in hopes it will not become another drain on the U.S. Treasury, but is reluctant to clamp down so much that it snuffs out the tentative recovery in housing.

How successfully the agency walks this tightrope could well determine whether the recovery gathers force, or whether home prices slide again — perhaps creating a fresh economic downturn.

As recently as a few weeks ago, the FHA had said that even under the bleakest economic forecast, its cash cushion would quickly recover. On Thursday, it abandoned that position.

“There is a real risk. Nobody has a crystal ball,” Shaun Donovan, secretary of housing and urban development, said in an interview. “We recognize there is a possibility that the reserves go below zero and stay there.”

Still, Donovan stressed that the agency, which had a role in one out of five home purchases in the last year, would not need a direct taxpayer bailout.

“There is no extraordinary action that Congress or anyone else needs to take,” he said during a news conference in Washington.

Instead, the agency would borrow from the Treasury, under authority previously granted by Congress. In the worst case, involving a protracted recession, the audit said the FHA would run out of capital in 2011 and have to borrow $1.6 billion from the Treasury to pay insurance claims, a relatively small sum.

That is not a situation the agency considers likely. In line with many analysts, the agency expects the housing market to turn down again over the next nine months and then to recover. Under this projection, foreclosures would be manageable and the reserves would quickly grow.

The FHA’s annual audit was scheduled for release last week, but was mysteriously delayed at the last minute. On Thursday, as it released the document, the agency explained that it wanted its auditors to include more negative forecasts as a way of understanding the worst-case risk.

The audit showed reserves to be 0.53 percent of the total portfolio, far below the 2 percent minimum mandated by Congress and far less than the audit last year had forecast. In 2007, just before housing prices began their worst slump in decades, the reserves were above 6 percent.

Ann Schnare, a consultant who has analyzed the FHA balance sheet, put the situation this way: “They’re running on empty.”

As the fortunes of the FHA have deteriorated over the last few months, the agency has become a focal point for dissatisfaction over federal efforts to prop up the housing market.

It is drawing comparisons to Fannie Mae and Freddie Mac, the giant agencies created by Congress to keep the mortgage market supplied with cash by buying up pools of home loans. With borrowers defaulting in the downturn, Fannie and Freddie have required enormous bailouts.