Posted on 09/25/2013 5:08:42 PM PDT by whitedog57
The Federal Housing Administration, weighed down by losses on souring loans, will likely need a cash infusion from the U.S. Treasury for the first time in its nearly 80-year history when the current budget year ends, according to sources familiar with the matter.
The agency, which offers private mortgage lenders guarantees against homeowner default, has nearly exhausted its reserves for the mortgages it backs, making it necessary for the government agency to turn to the Treasury Department for a cash injection.
The FHA has never needed to tap the Treasury before because it has been able to take other actions, including raising insurance premiums, to stay solvent.
The White House projected in April that the FHA would face a shortfall of $943 million for the fiscal year that ends on Monday, but the agency said it would wait until the end of the budget year to make a final decision on whether to draw Treasury aid.
FHA serious delinquencies peaked at 9.42% in Q4 2009 and have slowly fallen to 7.57% by Q2 2013.
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Although shrinking, FHA Serious Delinquencies remain over twice as high as Fannie Mae (yellow) and Freddie Mac serious (green) delinquencies which are at 2.77%.
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And if we look at Fannie Mae and Freddie Mac serious delinquencies WITHOUT credit enhancements, the comparison is more striking. FHA has 3 times the serious delinquency rate than Fannie Mae and Freddie Mac.
And remember what happened to Fannie Mae and Freddie Mae. They were placed into conservatorship with the Federal Housing Finance Agency (FHFA) in September 2008.
So, it is all that surprising the FHA is asking Treasury for more gruel? True, Fannie Mae and Freddie Mac were severely undercapitalized. But the FHA has experienced a severe capital shortfall.
This month, the FHA’s private generally accepted accounting principles (GAAP) estimated net worth deteriorated slightly. The estimate for August of the FHA’s GAAP net worth is –$26.68 billion, down from –$25.96 billion in July 2013. The capital shortfall stands at $47 billion (using a 2 percent capital ratio) and $67 billion (using a 4 percent capital ratio).
Of course, the FHA fishes in the risky part of the pond, so to speak. Their domain has traditionally been first time home buyers and minorities with low down payments and relatively low credit (FICO scores).
Look at FHA Serious Delinquencies and the U6 unemployment index.
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Ah the painfully slow employment recovery, coupled with declining real median household income is playing havoc with FHA-insured mortgages.
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For more reading on the FHA’s plight, check out Ed Pinto’s FHA Watch.
Was planned from the beginning of Cloward-Piven and Saul Alinsky tactics..
Over whelm the givernment..
If this is news to anybody their no doubt a democrat or a RINO..
Democrats are an unusually nasty set of scissorbills and the RINOs are just cowards.. if not outright Moles..
FHA needs more money to pay its own clerks astronomical salaries ....
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