FHA’s Troubled Loans
Despite raising mortgage insurance premiums substantially last February, FHA is struggling with a large number of delinquent mortgages.
Fitch Ratings is now saying that those government-backed loans comprise 83% of all 90-day delinquent mortgages in the market.
One reason for these delinquencies is the fact that you can get a FHA-insured mortgage with a scant 3.5% down payment.
That’s great for buyers with little money to put down, but borrowers who finance 96.5% of their home purchase are immediately underwater if they have to sell before realizing any price appreciation.
All of this raises the possibility of yet another government bailout.
How big would such a bailout be?
Anywhere from $50 to $100 BILLION, according to some analysts.
A billion here, a billion there, and it soon starts to add up to serious money! 
At this point, FHA is resisting suggestions to increase down payment requirements and instead relying upon increased mortgage insurance premiums to shore up its balance sheet.
Time will tell if that’s an adequate response.
Source: DSNews.com article
August 20th, 2012 Posted in Inside Real Estate
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