Sorry Folks, The FHA Is Still Going To Melt Down

John Carney | Feb. 3, 2010, 5:11 PM | 1,379 | 10

Although the FHA's default rate has been climbing for months, the agency insists that it will not run out of cash. Unfortunately for the taxpayers who will ultimately be stuck with the tab if the FHA is wrong, this seems to be based on some questionable assumptions.

Certain things the FHA has done will improve its financial state. It is charging higher fees for the guarantees it offers, which means it will have more income. It is also increasing the down payment required, which should prevent some mortgage fraud and reduce the eventual foreclosure rate.

But ultimately, none of these will rescue FHA if the FHA is wrong about one thing.

That one thing is the FHA’s assertion that the loans in backed in 2009 are much, much better than the loans it was back in 2007 and 2008. That seems highly unlikely.

In the first place, the FHA’s book of business expanded at a pace that is truly breath-taking. Although we don’t have the final numbers yet, we know the FHA probably insured more than 2 million single-family mortgages in fiscal year 2009, compared with 1.2 million in fiscal year 2008, and 639,000 in fiscal year 2007. Meanwhile, the number of FHA staff grew by just 80 people last year.

<SNIP>http://www.businessinsider.com/sorry-folks-the-fha-is-still-going-to-meltdow-2010-2

Who do they think they are? A cool apron does not earn you any respect from me, and.... um... what?

Reports I've read are that the FHA share of mortgages went DOWN, as the banksters gobbled up and sliced-and-diced US mortgages.

Are you confusing origination with the final note holder?