FHA May Get Taxpayer Bailout for First Time in 78-Year History

The Federal Housing Administration (FHA) announced on Friday that it will raise mortgage-insurance premiums an average of $13 a month for new borrowers of FHA-backed loans in a last ditch effort to avoid exhausting its reserves and prompting a taxpayer-funded bailout. 

Senator Bob Corker (R-TN) says the FHA's Friday announcement is just one more sign that the FHA has become part of the problem not the solution:

The recognition that FHA’s economic value is now negative is a stark reminder that we have put off fundamental housing finance reform for too long. FHA has strayed a long way from its original mission, and it’s time for us to return to fundamentals in housing, recognizing that having the federal government making loans to people who can't pay them back isn't good for homeowners, communities, or the country. 

The FHA, which insures lenders against losses, has floundered under the weight of mortgage delinquencies.  According to the Wall Street Journal:

Though the agency guarantees fewer mortgages than either Fannie or Freddie, it now has more seriously delinquent loans than either of the mortgage-finance giants. Overall, the FHA insured nearly 739,000 loans that were 90 days or more past due or in foreclosure at the end of September, an increase of more than 100,000 loans from a year ago. That represents about 9.6% of its $1.08 trillion in mortgages guaranteed.

If the hike in premiums doesn't help put the FHA's fiscal house in order, analysts say the Obama Administration may use taxpayer funds to shore it up next fall, a move that does not require congressional approval and that has never happened in the FHA's 78-year history.


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