The FHA Shows Us That This S&^% Can Only Keep Up So Long
There's another bailout coming and just like the last few, it's not for you. You didn't think they could keep this up forever, did you?
The Federal Housing Administration, which insures mortgages with low down payments, may require a U.S. bailout because it has $54 billion more in losses than it can withstand, a former Fannie Mae executive said.
“It appears destined for a taxpayer bailout in the next 24 to 36 months,” consultant Edward Pinto said in testimony prepared for a House committee hearing in Washington today. Pinto was the chief credit officer from 1987 to 1989 for Fannie Mae, the mortgage-finance company that is now government-run.
The FHA program’s volumes have quadrupled since 2006 as private lenders and insurers pulled back amid the U.S. housing slump, Pinto said. The jump has left the agency backing risky loans and exposed to fraud in a “market where prices have yet to stabilize,” he said.
The agency doesn’t need aid, in part because new guarantees are being made “at or close to the bottom” in values, FHA Commissioner David H. Stevens said.
Representative Scott Garrett, a New Jersey Republican, introduced legislation this month to boost the FHA’s minimum down payment to 5 percent from 3.5 percent to help shore up the agency’s insurance fund.
The market, which is struggling to recover, may also get less help from government aid programs that may lapse, including buyer tax credits and the Federal Reserve’s effort to cut loan rates by buying bonds.
What?! You mean Zimbabwe Ben's MBS shopping spree didn't save them?? Shame. Bend over, kids, it must be that time of year again...