Another Federal bailout...the FHA Needs (our) MONEY!!! It is a little early to know for certain, but it appears that the Federal Housing Administration (FHA) may need a $900+ million bailout. The exact ami9unt will be clear at the end of the third quarter of this year. The reason for the bailout is that the FHA needs to “reinforce its capital reserves.” Apparently ,this information was buried in the details of the president’s proposed budget released that was recently released. Shaun Donovan attempted to explain the FHA’s problems in the wake of public outcry over the dismissal projections for the FHA. Donovan explained that $900+ million in deficits is actually a good thing because “newer, safer business is expected this year”. However, his explanation actually may have just made taxpayers more nervous, since he said that the reason the deficit wasn’t much bigger is that “new loans that the FHA is making [this year] are profitable, if I can use that term.”
The FHA was founded almost 80 years ago and it has needed a bailout. Critics of the agency are outraged by the suggestion that nearly a billion dollars should be put aside in the federal budget for the FHA. “If the FHA were a private financial institution, likely somebody would be fired, somebody would be fined, or the institution would find itself in receivership,” ranted congressional representative Jeb Hensarling (R-TX). He added that “instead, the FHA is merrily on its way to becoming the recipient of the next great taxpayer bailout”.
Fortunately for the FHA, even if no members of Congress approved of its bailout, it could withdraw bailout money from the U.S. Treasury without congressional approval. The president’s administration noted in the budget that the funds might not be needed if increases in FHA insurance premiums tide the agency over.
The problem with this is that the Obama administration already tacked on .1% on every FHA loan to pay for the current administration’s policies. Any additional increase will cost taxpayers and home owner’s additional money. Further, the FHA is still lending in the equivalency of sub-prime loans so it is reasonable to conclude that the future is bleak for the FHA.
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