http://www.bloomberg.com/news/2011-07-26/fha-may-be-next-in-line-for-bailout-commentary-by-delisle-and-papagianis.html?cmpid=
As private-financing options have disappeared, the role of the FHA has grown. Its market share has increased to about 30 percent today from 3-4 percent in 2007. That’s because the agency is now practically the only game in town, accepting borrowers with down payments of as low as 3.5 percent. As the last few years have made clear, sizable down payments -- or“skin in the game” -- are the key to avoiding defaults in the near term and to achieving a stable housing market in the long term.
This means that the FHA is on the verge of requiring a bailout to support its outstanding mortgage guarantees, which are projected to exceed $1 trillion in 2011.
As private-financing options have disappeared, the role of the FHA has grown. Its market share has increased to about 30 percent today from 3-4 percent in 2007. That’s because the agency is now practically the only game in town, accepting borrowers with down payments of as low as 3.5 percent. As the last few years have made clear, sizable down payments -- or“skin in the game” -- are the key to avoiding defaults in the near term and to achieving a stable housing market in the long term.
FHA’s Bottom Line
So how has the FHA fared financially in serving borrowers with low down payments? As the housing bubble burst in 2007, and the number of mortgage-related defaults started to climb, the FHA’s capital reserves declined to $3.5 billion from $22 billion.This means that the FHA is on the verge of requiring a bailout to support its outstanding mortgage guarantees, which are projected to exceed $1 trillion in 2011.
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