The taxpayers continue to get hit for Uncle Sam’s profligate ways in guaranteeing and insuring loans to virtually anyone and everyone who wanted to buy a house. The financial fall-out continues, and this time it isn’t Fannie Mae and Freddie Mac. It is the Federal Housing Administration.
The Federal Housing Administration, hit by increasing mortgage-related losses, is in danger of seeing its reserves fall below the level demanded by Congress, according to government officials, in a development that could raise concerns about whether the agency needs a taxpayer bailout.
The rising losses at the FHA, part of the U.S. Department of Housing and Urban Development, come as the agency has rapidly increased its role in guaranteeing loans in an attempt to stabilize the housing market.
It isn’t clear how the rising losses may affect home buyers. Options for the agency could include politically unpalatable choices, such as asking for taxpayer funds to boost reserves or increasing the premiums borrowers pay for the insurance offered by the agency. Agency officials say if there is a shortfall, they don’t have to do anything except report it to lawmakers. But some mortgage and housing analysts see trouble ahead. “They’re probably going to need a bailout at some point because they’re making loans in a riskier environment,” says Edward Pinto, a mortgage-industry consultant and former chief credit officer at Fannie Mae. “…I’ve never seen an entity successfully outrun a situation like this.”
Oh well, it’s only money. When you have a national debt of nearly $12 trillion, face another $10 trillion in red ink over the next decade, and have accumulated $107 trillion in unfunded liabilities for Medicare and Social Security alone, what’s a few billion dollars more?