The FHA is Finally as Broke as the Post Office

A $16.3 Billion Hole, They Say

Following the sub-prime bubble's collapse, someone had to take over subsidized lending to people with not enough income to pay back their mortgage loans, or so the thinking among the political class seems to have gone.

To be underprivileged in today's society means two things: 1. you most likely enjoy amenities that would have been the envy of every king of 150 years and longer ago, and 2. you can't afford buying a house.

The latter is regarded as a defect in need of rectification, predominantly by the political left, but as some readers may recall, the 'ownership society' was propagated in this context by the right as well.

It was apparently not enough to drive the GSE's Fannie and Freddie into bankruptcy and conservatorship by a combination of reckless monetary policy and equally reckless political mandates regarding the provision of lending to the above mentioned 'underprivileged' class at conditions that can only be called insane.

No, the FHA had to be driven to the wall as well. Well, mission accomplished, as they say. With qualifying borrowers only needing 3.5% down payments, it was clear that the FHA would pick up precisely where a great many now broke subprime lenders left off. Thus 25.82% of its 2007 loans, 24.88% of its 2008 loans and 12.18% of its 2009 loans are now delinquent. The total insured FHA mortgages amount to $1.13 trillion, so there is a big tab coming down the pike for the tax cows.

Not surprisingly, a recent audit found the agency to be short a dollar or two, or more precisely, $16.4 billion (and presumably, counting). It appears in fact as though this number may be an artificially low-balled estimate. 

According to press reports:

“The U.S. Federal Housing Administration is facing likely losses that will swamp its capital and fuel a $16.3 billion deficit, but the Obama administration plans to take steps to try to avoid the need for taxpayers to bail out the loan insurer.

An independent audit found a gauge of the agency's capital adequacy had dropped into negative territory, the Department of Housing and Urban Development said on Thursday.

The findings likely mean the agency, which insures about one-third of all U.S. mortgages, will need taxpayer funding for the first

2012-11-24 04:40:07

Source: http://www.philstockworld.com/2012/11/23/the-fha-is-finally-as-broke-as-the-post-office/