Housing Horrors
Alternate Headline: “Housing Whores,” which actually might be both more appropriate and accurate.
After years of recklessly backstopping toxic loans with little to no regard for fiscal implications, losses are swamping revenues over at the Federal Housing Administration. A new study released last week shows the FHA some $16 billion under water. So naturally, bailout. This from The LA Times:
The FHA is required to maintain enough cash reserves to cover losses on the mortgages it insures. But in its annual actuarial report to Congress, the agency said a slower-than-anticipated housing market recovery has led its reserves to fall $16.3 billion below anticipated losses.
The FHA’s cash reserves aren’t supposed to drop below 2% of projected losses. They ended the 2012 fiscal year at -1.44%, down from the seriously low level of 0.24% at the end of 2011.
…
A request for taxpayer money would come in President Obama’s 2014 budget, set to be released in February, with a final determination of whether the FHA needs the funds coming next September. The FHA has permanent and indefinite authority to draw money from the Treasury, although it has never had to use that power.
Meanwhile, The Atlantic offers its take on the devolving mess that has become the FHA:
If it were a private company, it would be shut down.
It’s bad enough that FHA may be forced to seek a taxpayer bailout, just months after acting FHA Commissioner Carol Galante told Congress that “FHA is not broke.” What’s worse is that the agency’s mounting fiscal problems portend deep trouble for the housing market and the American economy as a whole.
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If Friday’s report does nothing else, it should underscore the commonsense notion that pushing families into homes they can’t afford is a terrible way to expand the American Dream.
It should, but it probably won’t.
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