No FHA Bailouts Now 25


FHA BailoutIf the FHA is really in as much trouble as they say they are, then I think it’s just about high time for a new system. All of this “in the black” “in the red” stuff is just getting ridiculous. Here’s the latest insanity.

By law the FHA is supposed to keep a 2% reserve ratio in a fund to protect them from the costs of default claims. Guess what the fund is at now. Minus 1.44%.

Yeah, I’m pretty shocked. Not that the system is so backwards that the protection fund itself actually owes money, but that no one in Congress is actually laughing about this. So you might be thinking that the “easy” answer for our beloved Congressmen is to throw money at it. Bail ’em out just like everyone else. Well, that is the default choice but some people are starting to think a little differently.

The most promising idea is to make some serious changes in how the FHA works. Besides for raising insurance premiums (of course) a new law bars irresponsible lenders, fines lenders who commit fraud, and requires reviews of performance.

For sure these measures aren’t going to completely solve the FHA’s problems, but I always find solutions are better than throwing money at a problem. Especially when it’s taxpayer money.

Do you agree?

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