Federal Housing Agency Almost Out of Money
It may need an unprecedented bailout
By Kevin Spak, Newser User
Posted Nov 15, 2012 8:16 AM CST
In this April 4, 2010 file photo, a forclosure sign tops the for sale sign outside a home in Denver.   (AP Photo/David Zalubowski, file)

(Newser) – The Federal Housing Administration is expected to announce this week that it's on the verge of running out of cash and may need taxpayer help, the Wall Street Journal reports. Rising mortgage defaults are battering the agency, which, though it guarantees fewer mortgages than either Fannie Mae or Freddie Mac, now has more seriously delinquent loans on its hands than either. About 25% of the mortgages it guaranteed between 2007 and 2008 have fallen into that category; in total, as of September it had insured 738,991 loans that were 90 days or more past due.

Thanks to the FHA's "permanent and indefinite" budget authority, it will automatically get any taxpayer assistance it needs, without having to ask Congress for the money. But such a rescue would be the agency's first, and likely set off a political firestorm. The Obama administration may try to stave it off with maneuvers like raising mortgage-insurance premiums, but Republicans have often called for more drastic action, like reducing maximum loan limits and increasing minimum down payments (currently as low as 3.5%). But economists warn that hampering the agency could have dire effects. "We would be talking about Great Depression II instead of the Great Recession," one homebuilding consultant says.

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Showing 3 of 26 comments
DougMasters
Nov 15, 2012 7:42 PM CST
"Thanks to the FHA's "permanent and indefinite" budget authority, it will automatically get any taxpayer assistance it needs" Whoever's idea that was needs their ass kicked.
Wydeeyed
Nov 15, 2012 3:59 PM CST
OK mark your calendars. I am in complete agreement with any Republicans calling for lower loan maximums and higher down payments. Defaults in home loans were, in a more rational economy and government oversight time, held in check by having 20% down as standard. This low to zero down payment scam was created in the auto market (30 years ago cars required 20% down to cover the depreciation) where it was easy to repossess the cars with nonpayment and sell them to someone else for new profits. Bankers looked at this easy cash and and decided running this game on housing would be awesome and that the rising house prices would crush the risk of depreciation. But housing isn't cars so a ponzi scenario unfolded. If bankers had engaged in sound economic practice such as not giving loans people couldn't pay on the premise that equity was equal to payments this crises would not exist. Bailing out the banks at the ponzi high prices in my view is as Pragmatist says "Throwing good money after bad".
NorCalHal
Nov 15, 2012 1:00 PM CST
NO PROBLEM - you need MORE MONEY, Oblama will give you more. After all he has all the money in the world (at least in the USA). See my other post four down.