FHA May Require A Taxpayer Bailout By The End Of Next Year: Report

The Federal Housing Administration's cash reserves have dropped so low that there is a close to a 50 percent chance it could run out of funds and may require a taxpayer bailout next year, the Wall Street Journal said, citing an annual independent audit of the agency's finances.

The audit estimated that the value of the agency's reserves were $2.6 billion as of end-September, down 45 percent from a year ago, according to the newspaper.

The audit, to be released on Tuesday by the FHA, was prepared by Integrated Financial Engineering Inc, an analytics firm, the WSJ reported.

The FHA, which provides mortgage insurance for millions of homeowners, has not run out of money and has not needed any Treasury funds partly because it has repeatedly increased homeowners' insurance premiums to raise cash and enforced tighter risk controls, the newspaper said.

"Even in the tough economic environment, we have been successful in protecting the (insurance) fund. We still clearly see there are downside economic risks that we have to be vigilant about," Carol Galante, acting commissioner of the FHA, told the Journal.

The FHA could not immediately be reached for comment by Reuters outside regular U.S. business hours.

(Reporting by Swetha Gopinath in Bangalore; Editing by Kim Coghill)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[AndrewDover]

09:54 AM on 11/26/2011

http://portal.hud.gov/hudportal/documents/huddoc?id=FHAMMIFundAnnRptFY11No2.pdf

says:

Here are some interesting quotes from the FHA report:

"As noted earlier in this report, all sources of data indicate that FHA is providing financing for at least one-third of all homebuyers requiring mortgage finance. FHA’s purchase mortgage business is a low-downpayment business, with 85 percent of loans insured in FY 2011 having downpayments of less than five percent." Page 20

"In summary, the independent actuarial assessments find that the MMI Fund capital ratio currently stands at 0.24 percent. That represents $2.6 billion in estimated economic net worth against an active portfolio of $1,078 billion. Last year the estimated capital ratio was 0.50 percent and the dollar capital position was $4.7 billion." Page 33

Page 46 says "the MMI Fund will pay out more than twice as much in claims in FY 2012 as in FY 2011, over $35 billion. After accounting for expected premium revenues and property-sale proceeds, core insurance operations will have a net cash outflow of over $19 billion, and the MMI capital resources at the end of FY 2012 would be $13 billion."

But don't worry, house prices will grow 6.1% in FY 2014, according to FHA table 16, page 49.

[ReaItors Are Liars]

06:40 AM on 11/16/2011

The Disease: Grossly Inflated Housing Prices

The Cure: Dramatically Lower Houisng Prices

The Cure is coming to every city town and state in America.

[ThinkTwiceWriteOnce]

05:56 AM on 11/16/2011

"mortgage insurance for millions of homeowners"

Technically, the homeowner is paying a premium for the bank so IT doesn't lose money. The too big to fail banks at this point should just settle for an IOU from the tax payer.......

[Rhonda Lutz]

10:43 PM on 11/15/2011

No more bailouts ! let them fend for themselves for now on ! its time to take a stand ! Get with it companies, we got to take care of us from now on! so sorry for your loss so move on , NEXT?

[gwbsucs1]

10:51 PM on 11/15/2011

well they won't fend for themeselves since they're governement controlled , if it was an independant , i 'd agree with you - but its a gov't entity - anyway ya look at it we're goin to be payin for it

[kamact]

10:39 PM on 11/15/2011

Take the money from the TBTF banksters,...

[fried52]

09:31 PM on 11/15/2011

It's a shame what crony capitalism has done to these GSE's. They were part of the foundation of this countries wealth. Since the 30s they helped build the American dream. There paper was considered better than AAA and sold worldwide as one of the most risk free investments a pension fund could make and still get a decent return. And on the other side of there coin ask any mortgage lender or broker who has been around for a while and they will tell you, had it not been for the GSE's there would have been NO regulatory body in the industry. All they tried to do was stay competitive when Wall St started sucking on the housing industry with all there innovative new instruments. There downfall started when Nixon privatized them. Wall St. just finished the job. At the peak of the market they only held 13% of there portfolio in sub-prime paper. There own book of mortgages had less than a 2% default rate. They lost all there money on the crap they bought from Wall St. Can I interest you in some AAA MBS's. Hard to believe it got that crazy.

So you don't want a Fannie or Freddie. Fine. Say goodbye to ever seeing a robust housing market in this country ever again. Say goodbye to what was one of the legs on the stool that was a part of the American Dream. Now you'll make your landlord wealthy instead of building your own wealth.

[Dukie07]

09:26 PM on 11/15/2011

Bull crap on the above video saying the housing market is stabilizing. What the hell - they the think is going to happen when the frozen foreclosure pipline with homeowners in default waiting for the bank to foreclose (millions upon millions) flooding an already 2.5 years surplus glut of short sale/auction/foreclosed homes. Yeah, that's not likely a stabilizng factor!! Come on now, the processing of the forclosures will send our economy into a depression , forget about this recession. How about some real reporting from economists, and enough of the unrealistic housing reports not researched. Prices will fall again, and then add in the strategic defaulters that take a look around after all the homes around them in foresclosure drag their mortgage underwater, leading them to follow suit. Housing is the most unstable place to put your money until that last tital wave of foreclosures then strategic defaulter come to light. Then and only then can the market even begin to stabilze.

[fried52]

09:41 PM on 11/15/2011

FWIW my rule of thumb under normal RE cycles has been; when the people who are buying the foreclosures are foreclosed on that will be the bottom. No one left to sell. Pretty simple and it's worked since the late 60s. My loan brokers are telling me that is happening now. But this will be different and other than the fact that the banks are starting to demo part of there inventory that's the only encouragement I can offer. Otherwise I feel your pain.

[Dukie07]

09:55 PM on 11/15/2011

Wow, I didn't even factor in people buying foreclosed properties being foreclosed on adding to the housing crisis. Interesting view point and probably realistic, but what a shame so many people have to suffer as the middle class shrinks even further.

[gwbsucs1]

10:53 PM on 11/15/2011

the housin market maybe takin a breather since the gov put a stop on robo signin , wait till after the holidays , it'll start up again

[bootsnchaps60]

08:33 PM on 11/15/2011

Let Chase or the newer kinder BoA buy it.

[Rhonda Lutz]

10:45 PM on 11/15/2011

lmao and then they get forclosed on! to funny! they deserve it though!

[Brian Workman]

08:17 PM on 11/15/2011

Now I know why my dad would lite his cigar with a dollar bill, because he said if he didn't, our government would burn up the bill anyway, and in the end, he wouldn't have ended up with a lit cigar!!

[The ORF in Largo]

08:11 PM on 11/15/2011

The Government should get out of the mortgage business or more accurately the business of
covering the losses of the mortgage lenders

[Dukie07]

09:04 PM on 11/15/2011

That's exactly why the banks never modified any FHA loans, because they were reimbursed the entire amount of the loan if it went into default and even if it went underwater they lost nothing. Nice loophole the government gave them along with millions of dollars in bail-out of taxpayer money- that they knew they were not mandated/obligated to help one single customer in any modification. Banks are just predators that look for weakness to profit (and with our stupid goverment-the 1% of the multi-millionares that run the country) it wasn't hard to do. In fact they made it seem fun, almost like a sport called the "Foreclosure" mill.

[drich104]

07:51 PM on 11/15/2011

Okay, this isn't Obamas fault, but it's time to slam the door on the FHA. No more. If you don't have at least 10% down and closing costs you can't but a home. That's it. I can't recoup the cost of my home and I can't walk away as I put too much down. Oh yeah I live in Florida, no surprise. I'm stuck, and I hope in 5 yrs maybe we will see an upturn. PS I'm middle class, no credit card debt. Right now I can afford the house, but I wish the banks would just take 15% off the principle and give me a 4.75% mtg. But, that won't happen will it?

[Dukie07]

09:05 PM on 11/15/2011

read above comment on why they will never do that, my friend.

[KsAPigButt]

07:33 PM on 11/15/2011

Forgot to add....Oh, but NO! No more taxpayer bailouts! Just pass the cup to all those in charge who didn't have the good sense God gave a goose to handle the business any better than that!

[jkint3245]

07:30 PM on 11/15/2011

Hi Barney want more of my money to blow. No problem ho mow.
How about you Dodd? You are incompetent like Barney. NO BAIL OUT For a worthless government agency!!!!!!!!!!!!!!!

[KsAPigButt]

07:29 PM on 11/15/2011

I cannot conceive why any insurance company is not required by law to have the money on hand, secured, to be able to cover each and every claim to customers they sell policies to.

That's what happened to the home owner's after Katrina when many companies did not..would not...pay for many of the legitimate claims, and after that, either the companies no longer insured certain areas, or they tripled, or more, the premiums of those they did insure.

People who had paid homeowners' insurance for years, many who never put in any claims, did not get paid for their damages for which they had coverage, and after, the homeowners ended up *reimbursing the insurance companies* for ALL the claims the companies did pay out. Nothing but a glorified 'Jessie James' robbery.

[mooncop1]

07:23 PM on 11/15/2011

Would the taxpayers expect anything less then another failing government agency. Maybe congress should outlaw all government agencies.