Is the FHA the next mortgage giant headed for a rescue?
Like Fannie Mae and Freddie Mac before it, the Federal Housing Administration is suffering in a mortgage hell of its own making. F.H.A. officials say they won’t need taxpayers’ help, but we’ve heard that kind of line before.
The F.H.A. backs $1.1 trillion of American mortgages and, by the look of things, it’s in deep trouble. Last year, its mortgage insurance fund was valued at $1.2 billion. Today that fund is valued at negative $13.48 billion.
Granted, that figure, reported by F.H.A.’s auditor, doesn’t represent actual losses. It’s an estimate of the difference between future mortgage insurance premiums that the F.H.A. will collect and the expected losses on the mortgages that the agency is obligated to cover over time, combined with the agency’s existing capital resources.
But the upshot is this: If the F.H.A. were to stop insuring new home loans today, it wouldn’t have the money it needs to cover its expected losses in the coming years.
Blowback
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Why not? Everything the feds does goes broke one way or the other and then demands to be bailed out by taxpayers. It seems only foto’s and select dc bunch get their ‘fair share’ of everything?
L
letget on December 2, 2012 at 3:08 PM
Fluke them all, in a very bad way, including all who ruined the honest people.
Yes, you scum from Massachussets and all who agreed with you, from the left to the right. May you all spontaneously combust.
Schadenfreude on December 2, 2012 at 3:21 PM
It’s even worse than you think
Do we really want to let Ponzis back into the housing market? There is a large group of people who’ve proven to be completely irresponsible with mortgage debt as evidenced by my daily debtor debacles. I wrote yesterday that Pent-up demand from boomerang buyers may not materialize, but isn’t stopping the FHA from trying. I have no problem with peak buyers whose only mistake was poor timing from reentering the housing market, but do we really want to let the irresponsible Ponzis back in? And do we as taxpayers want to be on the hook when they resume their old habits? That’s where the FHA is headed.
It shouldn’t be surprising that Ponzis want to own another cash cow. They were handsomely rewarded for owning last time. There is certainly no other asset class that provides such hefty returns in immediate spending money on such a small investment, so Ponzis will eagerly sign up for a chance at more free money. And if lenders want to risk their own money on these deadbeats, it’s their money to lose, assuming they hold these loans on their own books and don’t petition for another bailout. However, I can’t see the value in providing taxpayer-backed loans to a group of people with a proven track record of Ponzi borrowing. We know these people will default the moment the Ponzi money dries up. This is foolish.
Oil Can on December 2, 2012 at 3:30 PM
FHA.
Fannie.
Freddie.
Ginnie.
Not one more penny for any of them.
ajacksonian on December 2, 2012 at 3:50 PM
Of course they’re headed there. Please tell us something we don’t know!
Del Dolemonte on December 2, 2012 at 4:08 PM
As a result of Dodd Frank and other regulations, FHA is now frequently the only way to even get a look at a mortgage.
Restrictions vary by market, lender, and state but we went from one extreme to the other. Totally unvalidated loans for 1000% of someone’s annual income right to the other end where normal people with ok credit have to jump through 300 hoops and still may well fail to get a loan of 2-3x annual income.
Government oversight is a necessary safeguard – the kind of deranged government meddling we’ve seen for decades is fundamentally unhealthy.
CorporatePiggy on December 2, 2012 at 4:48 PM