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Could FHA require bailout?

By Judy Martel · Bankrate.com
Monday, June 10, 2013
Posted: 6 am ET

Projected losses over 30 years of the Federal Housing Administration, or FHA, could be much worse than originally estimated, according to the findings of a congressional committee. That's causing some to wonder if another government bailout will be required.

An audit by the House Oversight and Government Reform Committee, headed by Rep. Darrell Issa, R-Calif., says losses could be up to $115 billion in a worst-case economic scenario. That's in contrast to a report by independent auditor Integrated Financial Engineering Inc. of Rockville, Md., which estimated losses to the FHA of $64.5 billion. Congress requires the FHA to keep enough reserves to cover projected losses or to accept a government bailout if it can't.

Too optimistic?

The report by Issa's committee says the independent audit lacked information that would have increased the projected losses. In a letter to FHA Commissioner Carol Galante, Issa writes that emails released to the committee show the FHA may have encouraged its auditor not to publish the worst-case projections.

"The deteriorating fiscal state of FHA continues to be of great concern to the committee," Issa said in the letter, obtained by The Wall Street Journal.

In 2008, the government took control of mortgage giants Fannie Mae and Freddie Mac after they suffered huge losses from the housing market crash. So far, taxpayers have paid nearly $190 billion to keep them afloat, though both companies now show a profit as home prices rise.

The FHA guarantees mortgages against losses for lenders. It backed approximately a third of home loans underwritten last year. Since the housing crash, the FHA has been increasing its reserves by raising insurance premiums and underwriting fees. The money coming in could help it avoid a bailout.

Keep up with your wealth and mortgages, and follow me on Twitter @JudyMartel.

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19 Comments
M. Nutting
June 13, 2013 at 11:08 am

I agree with Wilson. STOP LENDING MONEY TO THOSE WHO HAVE NO MEANS TO PAY IT BACK!!!!!!!

paul f mcmanus
June 13, 2013 at 9:12 am

No surprise there with the FHA Giving out free $$$ 3.5% down on a mortgage and 3% back at closing great plan.Refi into a gov back loan if your under water ho points no closing cost,fha takes it anyway.$8ooo.oo for first time home buyers 56% are still under water another work of art by the ponzi boys. Fanny and Freddy record profits.Hello they dump all the bad loans on the taxpayer. Banks are borrowing at the lowest rate ever from the gov aka( TAXPAYERS $$$) making records profits charging 29% on there credit cards or more and lets not for get the extra fees. FHA now will have harge more fees to keep the cool aid moving along.Just another scam.

Dan
June 13, 2013 at 7:34 am

When you do what you always do,you get what you always get!Need reform.

tony
June 13, 2013 at 6:53 am

Hmmm, a republican representative from California predicts things far worse than an independent auditer; that ruined the whole article for me.

mjo
June 13, 2013 at 6:47 am

Another Issa report. Hmmmm. Need anyone say more? Scottie, beam this moron up already!

Jim
June 13, 2013 at 5:04 am

I tried to save my house but had to let it go when no one would help. They kept demanding more info or I would always talk to someone else. Run around run around then they say contact get hope another run around around. I HAD NOT ALTERNATIVE BUT THE FILE BANKRUPTCY AND i GOT SO UPSET i GOT REAL SICK AND NOW HAVE CANCER.
gOVT SHOULD BE BAILING OUT PEOPLE WHO GOT SHAFTED. i ALSO TRIED TO REDUCE MY DEBT BY A SCAM ARTIS A OUT BIG BANKS AND NOT THE SMALLPEOPLEND THEY TOOK OVER $10,000.00 OF MY SAVINGS. gUESS WHAT THEY DID THAT TO A LOT OF PEOPLE AND NOW THRY FILED FOR BANKRUPTUCY SO LOST THAT SAVINGS AS WELL.
i AM TIRED OF THE GOVERMENT BAILING BIG COMPANYS AND BIG

sailhardy
June 13, 2013 at 4:48 am

Since we discovered that the FHA omitted pertinent information for an audit during the Obama Administration, let us all condemn Rep.Darrell Issa (R-California) for telling us the truth.

llwwwilson
June 12, 2013 at 11:36 pm

You just have to stop loaning money when they don't have the means to pay it back. I say no bailout for FHA, go lock up your
doors and go home, we all would have been better off had you stayed there.

Hernan
June 12, 2013 at 11:15 pm

FHA bailout

Hernan
June 12, 2013 at 11:15 pm

FHA bailout

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