There's a 50-50 chance the Federal Housing Administration (FHA) may need a bailout funded by taxpayers, an audit of the government body shows.

Blame the slumping housing market.

The audit finds that the FHA's cash reserves stood at $2.6 billion as of Sept. 30, down 45 percent from an already low $4.7 billion last year thanks to rising home-loan defaults and falling home prices, a combination that equates to bigger losses on sales of foreclosed homes, the Wall Street Journal reports.
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The FHA backs about a third of mortgages financing home purchases, up from around 5 percent in 2006.

(Getty Images photo)

So far the FHA has been able to cover its exposure.

"Even in the tough economic environment, we've been successful in protecting the (insurance) fund," says Carol Galante, acting commissioner of the FHA, the Journal adds.

"We still clearly see there are downside economic risks that we have to be vigilant about."

The housing sector threw the country into recession and continues to dampen recovery.

Federal Reserve Chairman Ben Bernanke has said housing must improve for the economy to really gain steam.

"The housing sector is a very important sector," Bernanke said recently, according to Reuters.

"Problems in that sector are a big reason why our economy's not recovering more quickly."