FHA Saved from Needing a Bailout

Several months ago, the Federal Housing Administration (FHA) asked for a bailout. The White House Office of Management and Budget (OMB) crunched the numbers and found that the FHA needed $688 million. This would mark the first time in the FHA's 78-year history that a bailout was ever needed.

However, some good news has surfaced for the FHA.

We previously reported about the $25 billion settlement between attorneys general and the nation's five largest banks over fraudulent foreclosure agreements. We also mentioned the problem with Bank of America and Countrywide handing out mortgages to unqualified homeowners which brought about a $1 billion settlement. Because of these, and increased insurance premiums, the estimate that the OMB gave to the FHA regarding their bailout request is no longer necessary.

FHA premiums were recently raised ten basis points to pay for the extension of the payroll tax cut. The FHA says the premiums will be raised even beyond the budget proposal in an attempt to strengthen their fund and to insure that private capital continues returning to the housing market. Their budget was calling for increasing these premiums by 25 basis points for loans priced over $625,000. However, the FHA says that if the afore settlements had not happened, they no doubt would have implemented even larger premium increases to try to pull themselves out of the financial hole they were in.

While the FHA is saved from needing a bailout, they are still implementing premium increases in the near future.

Posted in: AG settlement,bailout,FHA,OMB