HUD made an announcement that FHA reserves are short and not what the suspected and that means trouble. FHA projected they would have 15 billion in reserves and they only have 3 billion in reserves they are in trouble financially. That means they cannot go below 3 billion so they have to draw on other reserves that we set aside for potential losses. This means that the new subprime is in the FHA or federal lending and we know what kind of trouble that caused. It is the first sign that we are headed down the same path that got the mortgage industry in trouble. Quick fixes are not always or maybe ever the correct path.
FHA is in big trouble so they will have to raise fees and or require more down payment to secure a loan. HUD must move in the right direction or there will not be a federal loan program