December 13, 2013

THAT WAS EASY:

Audit Shows FHA Faces $1.3 Billion Deficit (NICK TIMIRAOS, Dec. 13, 2013, WSJ)

The FHA doesn't make loans but instead insures lenders against losses. It has played a critical role helping the housing market by backing loans to borrowers who make down payments of as little as 3.5%.

Most of the agency's losses stem from loans made between 2007 and 2009, when the housing bust deepened. Loans made since 2010 are profitable, the report found.

The agency has taken a series of steps over the past few years to curb mounting losses, including raising the insurance premiums that it charges to borrowers. That has steered business away to other mortgage investors, and officials said they don't plan on any additional premium increases.

Separately, the agency is required by law to reduce in around 650 counties the maximum loan amount that it guarantees beginning next month, a step that could further reduce its market share.

Congress mandates that the agency maintain reserves equal to 2% of all loans that it guarantees. The agency breached that 2% capital-reserve ratio in 2009. The latest report shows that the agency could return above that 2% level next year, which is two years sooner than was forecast in last year's report.
Posted by at December 13, 2013 3:14 PM
  
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