Today's Wall Street Journal has an editorial today that warns that the Federal Housing Authority (FHA) and the agency that buys their loans, Ginnie Mae (almost all Reverse Mortgages are FHA insured) is getting too risky and could eventually need taxpayer bailout like Fannie Mae and Freddie Mac.

Here is the link to the article:

http://online.wsj.com/article/SB10001424052970204908604574334662183078806.html

I agree that there may be a shortfall in the future and I have posted before that it is possible, but comparing FHA loans to subprime is not really accurate for the following reasons:

1) All FHA loans require income verification. Almost all subprime defaults were no income or no doc

2) FHA loans are only for primary residences. One loan per customer. A lot of subprime defaults were on investment properties and many had multiple loans per client.

3) FHA fraud is prosecuted federally and once you defraud or even default on a federal loan, you get put on a list and cannot borrow or even be involved in the loan process again. There were no safeguards like this for subprime loans.

4)The government does take insurance premiums at the closing and on an ongoing basis for FHA loans. Obviously the question is do they have enough in premiums to cover the claim, but only time will tell the answer to that.