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FHA's low cash reserves cause worry

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TEXT OF STORY

Steve Chiotakis: Later today, the House Financial Services Committee inquires after the health of the Federal Housing Administration. The FHA guarantees the mortgages of millions of homeowners. But delinquencies and defaults are rising -- and the agency's cash reserves are falling. That has some in Congress worried about as Marketplace's Steve Henn reports.


Steve Henn: Three years ago, The Federal Housing Administration guaranteed less than 3 percent of mortgages in America. By last December, it made half of all home purchases possible. But...

Lisa Jackson: There has to be some tighter control of the risk that's there.

Lisa Jackson follows the FHA for John Burns Consulting. She says FHA losses have been mounting and capital reserves are sinking below minimums set by Congress.

Brian Chappell at Potomac Partners says the FHA can weather this storm.

Brian Chappell: They have roughly $30 billion in these accounts right now.

More than enough to pay for any expected defaults for at least four years. But Chappell worries if Congress asks the FHA to tighten its lending standards, the agency will pull back.

Chappell: And if FHA is not there to step in -- in times like these -- who else is going to do it?

Chappell says right now FHA-guaranteed loans are one of the only pillars still propping up the housing market.

In Washington I'm Steve Henn for Marketplace.

About the author

Steve Henn was Marketplace’s technology and innovation reporter for the entire portfolio of Marketplace programs until December 2011.

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