FHA Needs $1.7 Billion Bailout

FHA (Federal Housing Administration), provider of mortgage insurance of low down payment loans, is asking the Congress for $1.7 Billion from the Treasury to stabilize its long-term finances and cover potential losses from loans they insured from 2007 - 2009.  FHA is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934.

The amount is higher than the estimate since it is now insuring fewer loans than before. Additionally, Obama administration expected the bailout since April and has proposed $943 million budget for bailout fund by Sept 30, but the requested bailout was almost double the expected.

This is the first time since the agency's inception that it has required money from the government for its Mutual Mortgage Insurance Fund (MMIF). However, this bailout is so much less than the nearly $200 billion that the mortgage giants Fannie Mae and Freddie Mac required to stay in business during the housing bust.

Fannie Mae and Freddie Mac have recently posted record profits.

FHA Commissioner Carol Galante stressed that the agency does not need to pay claims at this point. It still has more than $30 billion in reserves. However, the law requires the agency to have enough reserves to pay off all claims over the next 30 years.

Big percentage of FHA losses (around $70 billion), were from loans originated from 2007 to 2009 and from its reverse programs.

For any question, please don't hesitate to contact me.

FHA, Bailout is Still a Possibility

As a result of the housing crash, private investors pulled out of the housing market.  FHA, the government mortgage insurer, helped stabilize the housing market.  Its market share increased to 25% from 3% market share during the boom. A lot of first time home buyers have turned to FHA to make home buying a possibility during the housing bust.  However, FHA's delinquency rate is still high at 8.22%, while the delinquency rate for all loans is at 5.88%.

It is hard for the low down payment market to get a loan without the help of the government.  The government helps make the availability of the capital on a large scale.  However, with mortgages getting more expensive, even with the help of FHA, home buyers may still have a difficult time afford a home of their own. And if the delinquency rate still goes up, then FHA might also need a bailout in the future.

If you're thinking of getting your new home, NOW is the time to act - before the rules get stricter and mortgage rates increase again. 

For more information on how to take advantage of the current market situation, please feel free to contact me.