FHA: Ready for the Mother Of All Bailouts?

posted at 7:29 pm on September 4, 2009 by The Other McCain

The FHA is on the hook for lots of “underwater” loans, taken out by low-income homeowners who got special low down-payment deals and — in case you didn’t notice — unemployment hit a 26-year high in August, with no prospect the 9.7% jobless rate will go down any time this year. Dave Hogberg of Investors Business Daily reports:

FHA-insured loans have more than tripled from 530,000 in fiscal year 2007 to 1.7 million thus far in 2009. The Government National Mortgage Association, which securitizes FHA loans, has boosted its mortgage-related issuance to $287 billion from $85 billion. Yet during that same period, the FHA’s loan delinquency rate has climbed to 14.4% in Q2 from 12.6% two years earlier.

OK, so guess what the consequences are now?

As job losses continue to mount, why would someone facing economic difficulties try to keep a home that is worth less than the money owed on it?

One expert explained to the Wall Street Journal what this means:

“They’re probably going to need a bailout at some point because they’re making loans in a riskier environment,” says Edward Pinto, a mortgage-industry consultant and former chief credit officer at Fannie Mae. “I’ve never seen an entity successfully outrun a situation like this.”

Read all about it at NTCNews.com. The revolution will not be televised, but the apocalypse will be blogged.

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