FHA May Need Bailout

http://5minforecast.agorafinancial.com/2010-on-track-for-record-deficit-fha-spills-the-beans-goldman-works-for-god-and-more/

The Federal Housing Administration revealed yesterday that it will likely need a government bailout. The results of an external audit (after being suddenly delayed for a week) showed the FHA’s capital cushion to be just 0.53% of its portfolio of insured mortgages. That’s way below the 2% mandated by Congress.In other words, the FHA has just $3.6 billion in reserves to back up a $679 billion book. That’s into the Fannie Mae stratosphere of leverage insanity, worse than anyone expected, and way, way beyond the Wall Street risk taking our government has so publicly vilified. Of course, a huge portion of these loans are easy-money, 3.5%-down mortgages designed to replace the subprime market and keep housing afloat during the last few years… and we’ve chronicled before their alarming rates of delinquency. The FHA’s auditors said that under adverse housing conditions, the administration could be out of money by 2011 and require a $1.6 billion injection. only off the actual reserves by about fivefold.