FHA Funds Plentiful, For Now

Apr 27, 12 • UncategorizedNo Comments

The FHA Says its financial cushion has dipped to a dangerously low level but should remain above zero under most “economic scenarios.”  The agency a major source of funds for first-time homebuyers, faces mounting concerns that it will eventually need a taxpayer bailout as losses grow from homeowners who lose their jobs and can’t pay their mortgages.  An independent audit being sent to Congress shows reserves for the fiscal year ending Sept. 30 fell to $3.6 billion, compared with $685 billion in outstanding insured loans.  That’s a ratio of 0.53 percent and far below the 2 percent level Congress has required since the 1990s. 

That reserve, effectively a backup fund for the agency, has been drained as foreclosures and defaults have soared.  “It is absolutely critical that going forward, we build that cushion back up,” Housing Secretary Shaun Donovan told reporters.  Since the collapse of the subprime lending market, the government has taken up the slack.  The FHA has insured nearly a quarter of all new loans made this year, and about half of all loans to first-time homebuyers this year.  

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