FHA Needs A Bailout

It has guaranteed thousands of defaulted home loans. Big surprise. It now needs a bailout.

The government stepped in to insure home loans that free market lenders did not want to guarantee.

The result? The government, meaning us the taxpayers, got soaked.

The Washington Post reports:

The Federal Housing Administration's cash reserves have shrunk to a level far below what is required by law, and the agency could need taxpayer funding if worst-case scenarios play out, according to an independent audit designed to measure the agency's financial soundness.

The audit examined the excess cash the agency must set aside to deal with unexpected losses in its flagship home-buying program, which has played a key role in supporting the housing market.

As of Sept. 30, those reserves had an estimated value of $3.6 billion, a sharp drop from the $12.9 billion available a year earlier, the audit found. The current total represents 0.53 percent of all outstanding single-family-home loans insured by the FHA, well below the 2 percent portion set by law. This is the first time reserves have fallen under that threshold since 1994.