Skip to comments.The Latest Taxpayer Housing Bust. With the election over, we now learn that the FHA is insolvent.
Posted on 11/20/2012 6:56:32 AM PST by SeekAndFind
Vindication is overrated, especially in a losing cause, so it brings no satisfaction to have predicted that the Federal Housing Administration would sooner or later threaten taxpayers. That day has arrived. Safely past the election, the feds announced Friday that the FHA's liabilities exceed its assets by at least $16.3 billionand the gap could reach $93.7 billion in the worst case.
Yet it's worth recalling that when we warned about FHA's troubles in September 2009, we got an accounting lecture from HUD Secretary Shaun Donovan and a letter from FHA Commissioner at the time, David Stevens, that we were "just plain wrong." He added that, "I can say undoubtedly that the FHA fund is playing a key role in the housing recovery and poses no immediate risk to the American taxpayer."
Taxpayers will "undoubtedly" be pleased to know that the threat wasn't "immediate" but arrived a mere three years later. Can taxpayers claw back the salaries of Messrs. Donovan and Stevens the way Congress has tried to do with those of financial CEOs?
The Administration is trying to spin the FHA's troubles as one more result of the housing bust, which is true but disingenuous. Fannie Mae FNMA -0.37% and Freddie Mac FMCC -1.02% went belly up in 2008 because of the housing boom and bust. At the time, the FHA was in relatively good shape because it had played a minor role during the housing mania.
The FHA got into trouble because it deliberately expanded in 2007-2009 even as the market was crashing. As Mr. Donovan likes to say, the FHA was steered to play "an important countercyclical role in the housing market." The point was to ramp up FHA's loan-guarantee business to prop up housing prices as much as possible during the bust.
(Excerpt) Read more at online.wsj.com ...
* While the FHA the Obama Administration politically, it arguably prolonged the recovery by failing to let prices find a bottom.
* FHA’s boom put taxpayers on the hook for tens of billions worth of dubious loans made at the most dubious time. Those are the loans now going bust.
* According to the new HUD report, FHA loans insured between fiscal 2007 and 2009 “continue to place a significant strain on the [single-family mortgage insurance] Fund and are expected to reach a total of $70 billion in claims.”
* The ugly math: 25.82% of FHA’s 2007 loans, 24.88% of its 2008 loans, and 12.18% of its 2009 loans were seriously delinquent as of June 30.
* The American Enterprise Institute’s Ed Pinto, who also predicted the FHA debacle, estimates that 17.3% of all FHA loans were delinquent as of September 30. That’s about one in six loans.
How can the FHA’s loan portfolio be performing so poorly? I keep reading that the housing market is ROARING back, stocks are picking up, hiring is up, and everything is rosy. The local paper tells me so.
RE: The local paper tells me so.
There’s the problem right there... expecting the papers to deliver accurate news all the time.
all I heard was how the economy was coming back the housing market is great and now after the election the truth comes out.
Now if we had a free and fair media then they could have reported the facts, the real issues, the real basic facts of Libya.
Hell we do not even know where obama was during these attacks, what he did, did he watch, did he go to the situation room , did he give the stand down order or did he go to sleep during the attacks and why did he say he was not told ?
We put our local radio on and the news came on for about 2 minutes.
During that time the so called news told me about who was dating who, what program is starting on TV and a local man was arrested for drugs.
That is what millions hear for their news and is it any wonder why we have so many idiots today voting for the Dem party
Don’t forget how factories are “humming” again.
FHA can’t be over budget, because there is no budget. Hasn’t been a budget for three years. /sarc/
What is the over/under that the foreclosed FHA houses will soon become ObamaHomes?
The bullshit factories are running three shifts.
What’s the problem? It’s just government money.