Crush of Foreclosures About to Swamp FHA

Taxpayers may foot the bill for defaulting homeowners
By Kevin Spak,  Newser Staff
Posted Feb 2, 2010 9:28 AM CST
In this Wednesday, Aug. 29, 2007 file photo, a foreclosure sign tops a sale sign outside an existing home on the market in northwest Denver.   (AP Photo/David Zalubowski)

(Newser) – The Federal Housing Administration is staring down the barrel of a rash of foreclosures that could force it to dip into taxpayer money for the first time. The number of FHA borrowers who have missed at least three payments jumped by a third last year, to 9.1%, which means the agency is almost certain to see a lot of foreclosures soon, the Washington Post explains.

The agency’s already been through plenty of those during the crisis, leaving its cash reserves precariously low. The FHA typically covers defaults with the fees borrowers pay it, but if it runs out of cash, the federal government will automatically send it taxpayer money to cover its losses. To compensate, the agency has raised its fees, and says it’s reining in poorly performing lenders.

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