The Federal Housing Adminstration May Need a Bailout

As the LA Times explains, "the Federal Housing Administration,
which has played a crucial role in stabilizing the housing market, said
it ended September with $16.3 billion in projected losses — a possible
prelude to a taxpayer bailout. The precarious financial situation could force the FHA,
which has been self-funded through mortgage insurance premiums since it
was created during the Great Depression, to tap the U.S. Treasury to
stay afloat. The agency said a determination
on whether it needs a bailout won't come until next year. * * * The FHA does not lend money, but guarantees loans made by banks in
exchange for insurance premiums. The agency's role has expanded since
the crash of the subprime mortgage market, and it now insures about $1.1
trillion in loans, according to Inside Mortgage Finance.

Leave a Reply

Your email address will not be published. Required fields are marked *