Federal Housing Authority Audit Sees Possible Bailout Need

[Slimprofits]

http://www.nytimes.com/2011/11/16/bu...d-bailout.html

Chances are nearly 50 percent that the Federal Housing Administration will need a bailout next year if the housing market deteriorates further, the agency’s independent auditor said in a report released Tuesday.

The F.H.A., which offers private lenders guarantees against homeowner default, has just $2.6 billion in cash reserves, the report found, down from $4.7 billion last year.

The agency’s woes stem from the national foreclosure crisis. In the last three years, the F.H.A. has paid $37 billion in insurance claims against defaulting homeowners, shrinking its cash cushion.

The auditors determined the agency’s level of supplemental cash reserves by projecting losses on its mortgage portfolio and counting them against expected premium revenue. This year, the audit found that the F.H.A. supplemental reserve was less than one-quarter of a percentage point of its current portfolio: $2.6 billion against a $1.1 trillion mortgage portfolio, as of Sept. 30. Legally, the housing agency is required to keep a 2 percent cash buffer, a target it has not met since 2008.

http://portal.hud.gov/hudportal/HUD?...1/HUDNo.11-270

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Re: Federal Housing Authority Audit Sees Possible Bailout Need

Chances are nearly 50 percent that the Federal Housing Administration will need a bailout next year if the housing market deteriorates further, the agency’s independent auditor said in a report released Tuesday.

50 percent my ass.

[Slimprofits]

Re: Federal Housing Authority Audit Sees Possible Bailout Need

How big is this one going to be?

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Re: Federal Housing Authority Audit Sees Possible Bailout Need

Sorry for being flip, but even tossing $50 billion into the FHA isn't going to make the budget deficit any significantly worse.

[swgprop]

Re: Federal Housing Authority Audit Sees Possible Bailout Need

Sorry for being flip, but even tossing $50 billion into the FHA isn't going to make the budget deficit any significantly worse.

Yeah but as the saying goes, 50B here 50B there, pretty soon we're talking real money.

In the worst case provided in the report, housing prices would continue to decline through 2014 and the agency would require a total of $43.2 billion from the Treasury.

A loan program requiring only 3.5% down payment in a declining market, what could possibly go wrong?

Using the report's "worst case" as a base, I'll double the estimate and guess at a bailout around $90 billion. Purely a WAG for fun without any hard math behind it.

[Slimprofits]

Re: Federal Housing Authority Audit Sees Possible Bailout Need

Thanks for that SWG

[Slimprofits]

Re: Federal Housing Authority Audit Sees Possible Bailout Need

http://www.usatoday.com/money/econom...low/51299978/1

The report uses as base-case scenario from Moody's Analytics, indicating a home price decline in 2011 of 5.6% and a small growth in prices in 2012 of 1.3%.

Other analysts have predicted a price drop in 2012, or at the very least a flattening with no growth. Still the independent auditors say "projections suggest that any further, nationwide price declines in 2012 would need to rival those of 2011 before this first level of support would be insufficient."