F.H.A. Audit Sees Possible Bailout Need

[alp227]

Source: NY Times

Chances are nearly 50 percent that the Federal Housing Administration will need a bailout next year if the housing market deteriorates further, the agency’s independent auditor said in a report released Tuesday.

The F.H.A., which offers private lenders guarantees against homeowner default, has just $2.6 billion in cash reserves, the report found, down from $4.7 billion last year.

The agency’s woes stem from the national foreclosure crisis. In the last three years, the F.H.A. has paid $37 billion in insurance claims against defaulting homeowners, shrinking its cash cushion.

The auditors determined the agency’s level of supplemental cash reserves by projecting losses on its mortgage portfolio and counting them against expected premium revenue. This year, the audit found that the F.H.A. supplemental reserve was less than one-quarter of a percentage point of its current portfolio: $2.6 billion against a $1.1 trillion mortgage portfolio, as of Sept. 30. Legally, the housing agency is required to keep a 2 percent cash buffer, a target it has not met since 2008.

Read more: http://www.nytimes.com/2011/11/16/business/economy/auditor-says-fha-could-need-bailout.html

[Uncle Joe]

1. FHA is a worthy program; that has helped tens of millions of people to purchase homes.

Thanks for the thread, alp.

[alp227]

2. uhmm, then explain the foreclosure crisis?

[Uncle Joe]

3. Conventional mortgages requiring little or no down-payment, little or no documentation with

no governmental oversight and scrutiny which was the primary culprit.

The banksters created conventional financing putting people into homes when they knew up front those people couldn't qualify and/or continue to make the mortgage payments, but the banksters didn't care because they would bundle and sell those mortgages on the secondary market to unwitting pension funds, state agencies etc. as triple AAA grade paper instead of the high risk junk mortgages for which they were.

As those people lost their homes to foreclosure, the value of all real estate dropped, including homes which had FHA mortgages, making it more difficult if not impossible for those owners to sell their homes for enough money to cover their existing mortgage, so FHA had to eat up those losses but make no mistake about it, the primary culprit was the banksters corruptive greed and the vehicle of destruction was the packaging of and dishonest marketing of those high risk conventional mortgages.

[jwirr]

6. Exactly - anyone who owns a home has lost value in that home. FHA

owns many homes that are probably mostly paid for by now and now are worth a lot less than when bought. FHA is one of those lending companies that has low interest, 30 year loans and does not just lend to anyone. I was refused a loan through them (rightly so) many years ago. They looked at your income and your debts and your credit history.

[No Elephants]

8. The primary culprit were mortgage backed securities and other mortgage derivatives

that had lenders scrambling for borrowers and offering the moon to get them.

Plus, separating the mortgages from the original lenders by mass sales of mortgages, so that that the person/entity that made the loan never had to suffer the consequences of default.

[Uncle Joe]

9. Yes that was the point of my final paragraph.

"As those people lost their homes to foreclosure, the value of all real estate dropped, including homes which had FHA mortgages, making it more difficult if not impossible for those owners to sell their homes for enough money to cover their existing mortgage, so FHA had to eat up those losses but make no mistake about it, the primary culprit was the banksters corruptive greed and the vehicle of destruction was the packaging of and dishonest marketing of those high risk conventional mortgages."

However I see nothing wrong with mortgage backed securities in and of themselves so long as there is strict, governmental oversight, and that applies to the origination of the mortgage as well, even if it's conventional financing.

The bad dishonest mortgages was the poison, the secondary market was the apple.

[Po_d Mainiac]

4. They shouldn't pay a fucking dime on

mortgages that were known to be defective when written.

Those should go back to the originator.

If there was fraud, it must be prosecuted. This includes (but not limited to) the so-called 'mortgage specialist' and appraiser if price pumping occurred.

This bailing out of bad behavior with tax dollars has gone past the point of absurdity! :grr:

[Uncle Joe]

5. That was far less likely to be the case with FHA than it was with conventional mortgages requiring

little or no government oversight.

[Uncle Joe]

7. One other point if FHA were eliminated, the banksters would be rewarded, because the people

wouldn't have any other means to turn for the financing of real estate, except in the case of veterans getting VA financing.