They’re baaaack: FHA prepares to raise premiums to boost reserves…

When last we visited with the FHA they were swearing up and down they would not need a bailout and were expanding their loan programs hand over fist.

So how’s that working out for them? It’s not. They are going to tighten standards (which will hurt housing but it has to be done) and they are asking Congress to allow them to raise premiums on current homeowners. In addition they are finally acknowledging that audit that said they would not need a bailout may have been overly optimistic:

“We have to replenish the reserves and we have to be prepared for a market outcome that may not be as favorable” as one that was forecast by the auditor, said David Stevens, the FHA’s commissioner, in an interview Monday. The audit estimated that the agency wouldn’t need any funds from the U.S. Treasury next year.

Imagine that!! what a shock! maroons.

…Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, plans to ask Congress on Wednesday to raise the cap on the annual insurance premium that the FHA can charge borrowers. In testimony before a congressional panel, he will also outline steps the agency is considering to set minimum credit scores, to require home buyers to put more money down, and to make lenders more accountable for loans that the agency insures.

Those measures are designed to begin rebuilding the agency’s depleted capital reserves. An independent audit last month said that the estimated value of those reserves had dropped to $3.6 billion, or about 0.5% of the $685 billion in loans the FHA has insured...

The FHA will also limit the amount of money that sellers can provide for closing costs on home sales to 3% of the home price, from the current level of 6%. The agency is also finalizing plans to set a minimum credit score for borrowers, possibly by requiring those making small down payments to have higher credit scores….

Barn door, closing, horses, cows gone. You know the drill.

December 2, 2009. Tags: , , , , , , , , . Economy, Finance, Foreclosures, Housing, Obama Administration, Politics, TARP, Taxes, Unemployment Statistics, Wall St.

One Comment

  1. Housing: FINALLY! Some data on the trial mods! Treasury reports more than 27% of homeowners in trial modification are delinquent… « Moderate in the Middle replied:

    […] The real shxtstorm is gonna hit us when FANNIE and FHA run out of money. Their book is over 3 TRILLION at FAN alone now and their delinquency rate is EXPLODING. A month after saying they Absolutely Positively did not need a bailout, the FHA is raising it’s premiums, cuz guess what? They need a frakkin bailout… […]

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