FHA Running Out Of Money

The Federal Housing Administration is nearly broke. Or in their parlance, dangerous low in cash reserves.

Yes, this is the same FHA that has provided loans to those who are unable to come up with the down payments that most banks are requiring or that loans for those with credit blemishes.

The same FHA that has provided some life to the housing market the past year.

Anyone gulping yet?

Now it is not that glum, they have the ability to be bailed out by the government so that pipeline to funding for prospective buyers is not shut off yet, but still it is a bit disconcerting to think that the only lender left in the near term could be banks that would rather not lend to housing unless the loan is guaranteed in blood with a first born as collateral.

The agency, which guarantees loans for many first-time homebuyers, could be hit if housing prices lose ground or if a new wave of mortgage defaults, triggered by double-digit unemployment, crashes into the market in the coming months.

If the FHA runs into financial trouble, it could make it more difficult for borrowers to get loans, particularly first-time buyers.

Housing Secretary Shaun Donovan said while an independent audit showed that the FHA burned through its backup fund as defaults and foreclosures spiked during the mortgage crisis, the analysis also showed that the agency should remain solvent under “most economic scenarios,’’ including higher unemployment and mortgage defaults. via Boston.com

Related posts:
  1. Why We Might See Another Housing Slowdown if FHA Loans Blow Up
  2. Fannie Mae Makes More Bad Loans After Getting More Government Money
  3. Strategic Mortgage Defaults Rising in Hard Hit Regions
  4. Mortgage Lending Drops as Interest Rates Rise – Surprised
  5. FHA Creating Next Housing Bust? 1 in 8 FHA Loans is Delinquent

There Are 7 Responses So Far. »

  1. Why didnt we plan for this years ago? Even with a crazy housing market they should be able to keep a better eye than that on their available funds.

    -Tyler

  2. Disturbing news but I suppose not that surprising given how bad the housing market is and how high unemployment is. Sure hope they can stay solvent.

  3. I’m gulping.

  4. sad

  5. An agency with no money is planning on leasing homes back to people, rather than foreclose. How can they absorb those losses? Oh, we, the taxpayers, absorb the losses. Well, the Chinese and Arab lenders do.

  6. [...] FHA is Running Out of Money [...]

  7. Don’t worry. Bail out number 2 on the way!

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