The Federal Housing Authority backs 15% of mortgages in the US. And for the first time in its 78-year history, the FHA might have to ask taxpayers for some help.
The FHA ended the fiscal-year 2012 with a $16.3 billion fund deficit…the result of mounting losses from defaults on loans that it backed during the housing bubble. The agency has lost $70 billion on loans it guaranteed between 2007 – 2009. And as of September, more than 17% of all FHA loans were delinquent.
A new report by an independent actuary shows that now the government mortgage insurer doesn’t have enough assets to cover the projected losses on the $1.1 trillion in mortgages that it guarantees.
The law requires the insurer to keep more than enough money in reserve to cover its projected losses. But those reserves have been dwindling in recent years.
The FHA was quick to counter the report, arguing that “this does not mean the FHA has insufficient cash to pay insurance claims, a current operating deficit, or will need to immediately draw funds from the Treasury”.
In other words, the FHA has some money left so it doesn’t need any taxpayer dollars immediately…
In the past couple of years, the FHA has increased its premiums and tightened credit standards to try to avoid going to the government for help.
It’s raising premiums again in January, and it will sell some of its delinquent loans, but that might not be enough. A “final determination” about asking for aid will be made next year.