FHA is Going Under 1

FHA mortgage exposureThe FHA is in trouble. It’s taking on water and starting to sink. Only time will tell if we’re about to see the end of it.

I don’t know if too many of you will be sorry to see the FHA go. And we know predictions have been wrong in the past. So whether the FHA will weather the current storm or not, someone’s going to be disappointed.

Basically a new wave of delinquencies are pushing the fund back into bad shape. They won’t be able to keep this many bad loans on the books and will have to start sending them back to the banks. They need to have a minimum amount of capital, just 2%, and it doesn’t look like they’ll be able to meet that.

Unfortunately, people are starting to talk about the “easy” way out. Namely, government bail out. This huge bill, between $50-$100 billion by some estimates, would be a first for the FHA, but not even close to the first, or probably the last, in just this recession.

What do you guys think? Retire the FHA? Bail it out? Leave your thoughts and let’s see what’s going to happen.

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One thought on “FHA is Going Under

  • dominionprime

    Only problem I see initially is that if FHA fails it would lock a large section of lower middle class people out of purchasing a home. But, that being said, it is also this group that is hardest hid in this recession and hence the reason for the new wave of delinquencies. This is likely not going to be over any time soon, as an investor it still bodes well for the buy-hold strategy as these people will have to move into the rental market.