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Will the FHA need financial help?

Marketplace Staff Nov 13, 2009
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Will the FHA need financial help?

Marketplace Staff Nov 13, 2009
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TEXT OF STORY

Steve Chiotakis: The Federal Housing Authority is the latest government housing agency to grab the headlines. Yesterday, the FHA released an audit that showed its cash reserves are at razor-thin levels. Sound familiar? Where do we go from here? Here’s Marketplace’s Nancy Marshall-Genzer.


Nancy Marshall Genzer: The FHA insures lenders against the possibility of default, if people stop paying their home loans. It charges borrowers a premium. Defaults used to be pretty rare. So the
FHA built up a surplus. It had more money on hand than it needed to. By law, its reserves are supposed to equal 2 percent of all the mortgages it insures. But now, it only has about a half-percent on hand. Will the taxpayers have to ride to the rescue?

ALLAN MENDELOWITZ: I don’t think the taxpayers have to worry about a massive bailout of FHA.

That’s Allan Mendelowitz, a retired federal housing official. He says, for years, the FHA had a surplus. It collected more in premiums than it paid out. Now, it might have to pay out more than it takes in. But Mendelowitz thinks the agency will be able to avoid a bailout, and will be back in the black when the housing market stabilizes.

In Washington, I’m Nancy Marshall Genzer for Marketplace.

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