Rising delinquencies threaten Federal Housing Administration

The Federal Housing Administration’s annual report is due out this week and there’s concern the agency, which insures more than a trillion dollars in mortgages, is in big financial trouble thanks to rising mortgage delinquencies and foreclosures.

Robert Van Order, a real estate professor at George Washington University, says the agency didn’t do a lot of business during the worst years of the housing crisis, “but they picked up more business in 2008 and 2009 which weren’t especially good years.” 

Van Order says the increase helped stabilize the housing market because the FHA insured home buyers when private companies wouldn’t. The agency insures lower-income buyers who put down as little as 3.5 percent. “Their losses come from stepping in and taking up some slack during the recession,” he says. 

Van Order adds that, with the economy on the mend, it’s time for the FHA to reduce market share and rethink who it insures. “Look to moderate income, maybe first-time buyers, but not into the major part of the market.” 

If the new Federal Housing Administration report shows reserves are depleted, there is worry that might impact taxpayers.