Nov 2011

FHA in trouble and increasing loan limits?

By admin

Over the last few days we have seen reports of how troubled and undercapitalized the Federal Housing Administration (FHA) is.  Some even believe the FHA will actually need a bailout!  And today news has surfaced that FHA loan limits are on the rise pursuant to a bill moving through Congress?

What is the truth and what should the public think?  It appears FHA is broke and worse is that they don’t even need to go to congress for a true bailout.  FHA merely needs to go to the Federal Reserve to enhance the funding.

The truth is they won’t survive with such a huge insurance portfolio, up 400% during the same period housing prices have fallen.  Granted, most of the recent FHA transactions we have seen over the last 2 years are much more clean then the prior several years.  And perhaps Congress is rationalizing a increase back to the higher loan limits actually means better performing loans to be insured?  Moreover, the increase may allow for some with higher loan amounts to refinance more easily perhaps staving off potential issues in their current loans.  Either way, this does not solve the fact that there are clear concerns for FHA and its future…

Below is a clip from CNBC earlier today talking about the current news on FHA’s fiscal situation.  Highly recommend…


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