The agency has expanded so-called short sales — when a home sells for less than what is owed on the mortgage. And it has raised annual insurance premiums paid by FHA borrowers by an average of $13 a month.
"Based on those steps, I believe we have significantly decreased the chance of having a bailout at the end of 2013," Donovan said.
But Sen. Richard Shelby of Alabama, the committee's senior Republican, said the agency must do more.
"It is time for serious reform of the FHA before it needs a taxpayer bailout, if it isn't too late already."
Donovan agreed the changes would be helpful. But he said that HUD lacks the legal authority to make those changes in the FHA's operations and Congress would have to revise the law to make it possible.