FHA Nears Need for Taxpayer Funds (More Bailouts!)

WSJ ^ | 11/15/2012 | Nick Timiraos

[mojito]

The Federal Housing Administration is expected to report this week it could exhaust its reserves because of rising mortgage delinquencies, according to people familiar with the agency's finances, a development that could result in the agency needing to draw on taxpayer funding for the first time in its 78-year history.

Such a report would likely set off a political fight over the government's role in housing, as it raises the prospect of billions of dollars being added to the U.S. government's effort to stabilize the hard-hit sector in the aftermath of the 2008 financial crisis, which already includes $137 billion spent to bail out Fannie Mae and Freddie Mac. Together with Fannie and Freddie, federal agencies are backing nearly nine in 10 new mortgages.

The New Deal-era FHA, which doesn't actually make loans but instead insures lenders against losses, has played a critical role helping the housing market by backing mortgages of borrowers who make down payments of as little as 3.5%—loans that most private lenders won't originate without a government guarantee. The FHA accounted for one third of loans used to purchase homes last year among owner occupants.

Though the agency guarantees fewer mortgages than either Fannie or Freddie, it now has more seriously delinquent loans than either of the mortgage-finance giants. Overall, the FHA insured nearly 739,000 loans that were 90 days or more past due or in foreclosure at the end of September, an increase of more than 100,000 loans from a year ago. That represents about 9.6% of its $1.08 trillion in mortgages guaranteed.

[mojito]

Need a house but can't come up with the down payment or the monthly payment? Never fear, Big Government is here with free other peoples money just for you!

Those 0bama voters just love that free goverment stuff. And 0bama voters sure love those bailouts.

We're going to get a lot more of them.

[2banana]

CAUSE:

by backing mortgages of borrowers who make down payments of as little as 3.5%—loans that most private lenders won't originate without a government guarantee.

EFFECT

Overall, the FHA insured nearly 739,000 loans that were 90 days or more past due or in foreclosure at the end of September, an increase of more than 100,000 loans from a year ago. That represents about 9.6% of its $1.08 trillion in mortgages guaranteed.

Any questions?

[GeronL]

We need to stop bailouts. Really.

[mojito]

The great thing about this bailout is that Congress doesn't get to vote on it:

Because the FHA has what is known as "permanent and indefinite" budget authority, it wouldn't need to ask Congress for funds; it would automatically receive money from the U.S. Treasury.

[I want the USA back]

This was foreseen and intentional. Soon government money (for non-Whites) will be just another entitlement.

[GeronL]

Congress has abdicated its authority to the executive branch over and over and over again.

[DuncanWaring]

Haven’t the following two stories also popped-up in the last day or so?

1. Mortgage delinquencies are decreasing
2. FHA lending standards are too stringent, preventing loans to people who can’t pay them back.

???