After $4.6 Billion in Losses Head Says FHA May Have To Shut Down?
This is a wacky little bit of news and is most likely inside the beltway jockeying, but in a recent speech Brian Montgomery, head of the Federal Housing Administration, said that if losses continued at the pace they are on, the F.H.A. might have to shut down.
Meanwhile Congress and the President are debating a 300 billion dollar housing bailout program that the F.H.A. would be administering. So whats it gonna be boys?
I could never imagine a federal agency just shutting down because of a lack of money, that would mean they were accountable. And if you know Washington, you know that will never happen.
But it is interesting that the F.H.A. is taking a hit along with everyone else in the housing market. F.H.A. clients are mainly low income borrowers, first time homebuyers, and minorities. The homes that they finance are starter homes, exactly the homes that have been hit the worst in the housing downturn.
Did they really think they could get through unscathed?
But do not expect the huge government entity to close it’s doors. That just does not happen in our nations capitol to public sector entities. That would be unseemly. Only the private sector has to bear the responsibility of their decisions.
But Mr. Montgomery warned that the F.H.A. would have to renew its efforts to end the seller-financed down payment program, which accounted for 35 percent of its loans in 2007.
He said the mortgages had foreclosure rates three times those of traditional loans and would push the F.H.A. to the brink of insolvency.
“Let me repeat: F.H.A. is solvent,” Mr. Montgomery said on Monday in a speech at the National Press Club. “However, no insurance company can sustain that amount of additional costs year after year and still survive. Unless we take action to mitigate these losses, F.H.A. will soon either have to shut down or rely on appropriations to operate.”
F.H.A.’s projected loss, more than four times the shortfall attributed to the home program last year, raised concerns about the agency’s ability to lead the national effort to rescue homeowners facing foreclosure. via NYTimes.com.
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Comment by Jonathan Blackwell on 12 June 2008:
I wouldn’t lose to much sleep over this. FHA isn’t going anywhere, it will continue to expand until mortgage backed securities return to being in vogue and then it will recoup its losses.
$4.6B for real? Irag and Afghanistan cost over $12B a month.
Comment by jp moses | REI Tips on 16 June 2008:
“I could never imagine a federal agency just shutting down because of a lack of money, that would mean they were accountable.” — BRILLIANT! I agree, the chances of them going under are next to nil. But it’s interesting that they would even talk about it publicly.