FHA heads the way of Fannie, from kleenex to toilet paper

Tuesday, August 11, 2009 ·

Ginnie Mae and FHA are becoming $1 trillion subprime guarantors

On June 18, HUD’s Inspector General issued a scathing report on the FHA’s lax insurance practices. It found that the FHA’s default rate has grown to 7%, which is about double the level considered safe and sound for lenders, and that 13% of these loans are delinquent by more than 30 days. The FHA’s reserve fund was found to have fallen in half, to 3% from 6.4% in 2007—meaning it now has a 33 to 1 leverage ratio, which is into Bear Stearns territory. The IG says the FHA may need a “Congressional appropriation intervention to make up the shortfall.


Here is your catalyst for the next financial crisis.

0 comments: