Federal Housing Administration (FHA) Could Need Taxpayer Bailout?
Posted on | September 18, 2009 | No Comments
The Federal Housing Administration is very short of cash and could need a taxpayer bailout in the near future. The FHA stated that the amount of cash it has will go below the mandated level but they are insistent that a taxpayer bailout will not be needed. The government agency which is a source of funding for new home buyers has seen huge losses. The losses are mostly due to home owners who lose their job and cannot pay their mortgages.
Federal law requires that the Federal Housing Administration maintain 2 percent more cash than it has expected losses for the next 30 years. The current study being conducted by the FHA could show that they are going to drop below this 2 percent level. The study is going to be sent to Congress in November. It will be very interesting to see how Congress reacts and if they ask the taxpayer to help bailout the FHA.
The FHA currently insures approximately 5.3 million mortgages which is up drastically from the 1.3 million of about three years ago. The current mortgage crisis has hurt many mortgage lenders but it has also hit the FHA extremely hard. Even though the FHA claims that they are not going to need a bailout it looks as if they will need funding from somewhere. My guess is that funding will come from the Federal Reserve Bank.
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Author: Jesse Wojdylo
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