Wednesday, November 21, 2012

What The Mayor Is Costing Us

From the Wall Street Journal: U.S. Housing Agency Close to Exhausting Reserves

The Federal Housing Administration is expected to report later this week that it could exhaust its reserves because of rising mortgage delinquencies, according to people familiar with the matter. That could result in the agency needing to draw on taxpayer funding for the first time in its 78-year history.

The FHA's tenuous financial condition would put a spotlight on an often-overlooked housing-market rescue. The New Deal-era agency, which doesn't actually make loans but instead insures lenders against losses, has played a critical role stabilizing the housing market by backing mortgages of borrowers who make down payments of as little as 3.5%—loans that most private lenders won't originate without a government guarantee. The FHA accounted for one third of loans used to purchase homes last year among owner occupants.

Already, the Obama administration has taken a series of steps to stabilize the housing sector since the 2008 financial crisis, including $137 billion spent to bail out Fannie Mae and Freddie Mac. Together with those two companies, federal agencies are backing nearly nine in 10 new mortgages.