“The Federal Housing Administration’s net capital ratio, or reserves after accounting for projected losses, fell to 0.53 percent in the year ended in September, from 3 percent in fiscal 2008 and 6.4 percent in 2007, according to an annual review sent today. While FHA said the fund “has good prospects,” it is changing its risk models to account for the possibility of the ratio falling below zero.”
“[Housing and Urban Development Secretary Shaun Donovan] said the economy is worse than housing officials expected and projected claims against the insurance fund are higher than forecast. The fund is already below the 2 percent reserve threshold FHA is required to maintain by Congress.”
FHA Reserve Ratio Falls to 0.53%, Lowest in History [Bloomberg]

Comments from Plugged-In Readers

  1. Posted by Jimmy (No Longer Bitter)

    Crank up the bailout machine again!

  2. Posted by dub dub

    I hear twice-cooked books are delicious!

  3. Posted by OneEyedMan

    So, $31,000,000,000.00 is their reserve that’s only 1/4 of what it’s supposed to be? Where’s the other $93 Billion coming from?

  4. Posted by Rincon Hill Billy

    lolcats @ OMG 4 FHA lmao /cry

  5. Posted by polip

    but remember what Barney Frank said about FHA’s awful underwriting – “It’s a policy”
    and so are the neverending bailouts
    the greatest white collar theft in history continues unabated

  6. Posted by ex SF-er

    the greatest white collar theft in history continues unabated
    truer words were never spoken. and that’s what gets my goat every time. worse, most people have no idea.
    of course we’ll soon get the “who could have possibly foreseen this????” from our “leaders” and “experts”.
    A quick google search of me shows me saying the following, but I’m neither a leader nor expert, and thus I can see the obvious.
    nobody’s talking about this yet… but what about FHA?
    It is highly likely that the future govt plan to “save” housing will shift to FHA.
    And we are currently “modernizing” FHA. This means we are
    -dropping required downpayments
    -increasing loan allowances
    -loosening FHA guidelines.

    if this all goes through, I wonder what major “unforeseeable” surprise will happen going forward.
    Posted by: ex SF-er at July 11, 2008 5:26 AM
    My guess is that we’ve already started the process. we have FHA, Fannie, Freddie and Ginnie taking expanded risk. we have the Federal Home Loan Banks assuming tons of risk (over $50Billion loan to countrywide as example). and we have the Fed itself possibly at risk ($30b to Bear/JP Morgan).
    My thought is that we’ll keep unloading the garbage to the above entities. Then when they fail we’ll be forced to bail them out.
    Posted by: ex SF-er at March 24, 2008 5:30 AM
    (this was before the F and F bailout).

  7. Posted by flfsjfsdkljfklsdfj

    And just how is it possible for the Federal Reserve to ever have risk? The assets they hold are priced in dollars and they print dollars.
    And why do they ever have to sell these assets or discover market price.

  8. Posted by diemos

    Technically it’s Treasury that runs the printing press. The FED can provide credit to the banks but that credit is eventually supposed to be paid back at full value.

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