Is FHA Going To Run Out of Money

by Michael Bolton on December 7, 2011

FHA’s reserves have fallen to just .24%, which is supposed to cover the future losses of the $1.1 trillion in mortgages they’ve insured. That’s less than half of what they had last year, and significantly less than the 2% mandated by Federal law. There is a 50% chance that FHA is going to need a taxpayer bailout. For the complete story see the WSJ.

This is all on the back of the decision by congress to increase the loan limits to $729,750, which the NAR lobbied heavy for. Are we just kicking the can down the street, because I’m afraid that we’re coming to a dead-end? We’ve been bailing out Fannie and Freddie to tune of billions and billions of dollars, and now we’re going to be doing the same with FHA by heading down this path.

So why the shift to FHA; because FHA doesn’t have to go to congress for bailout money, all it has to do is go to the Treasury. No more political wrangling, just open the cash drawer and get what you need. In FHA’s 77 year history they’ve never needed a bailout, and I believe that is about to change-soon!

One of these days there’s going to be some real leadership, and these issues will be addressed. It’s only when politicians have their backs against the wall do they decide to do something. They’re going to have to make it profitable for the private sector to come back into the market; there is no way of getting around it, and the sooner the better. All of the “new regulations” are just pushing private lenders out, which is the opposite of what we want or need right now.

If you have any questions, or real estate appraisal needs (divorce, bankruptcy, tax appeal, or estate planning) please contact Michael at 612.599-2581, or use the form on the contact page.

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