FHA Reserve Fund Hits 7 Year Low, Bailout Coming?

imageFor a while there was plenty of discussion about the subsidy needed for the Federal Housing Administration’s reverse mortgage program but recently all eyes have turned to whether or not FHA as a whole will need a bailout of its own. 

Despite senior FHA officials assuring Congress that the agency will not need a bailout, the Washington Post reported its reserves were $10.04 billion as of June 30, the lowest level in nearly a decade, according to agency data.

Seven years ago, the fund had twice as much cash. It remains in the black only because it has accrued interest.

image An audit of FHA’s finances was supposed to be released earlier this month, but FHA delayed in citing problems with the financial-stress tests it had requested that went "above and beyond" what the audit typically entails. Agency officials declined to detail the nature of these problems.

"I don’t know what ‘above and beyond’ economic scenario testing FHA asked [the auditing firm] to do, but it’s pretty easy to envision how a ‘truly stressful’ scenario would wipe out" the FHA reserves, said Thomas Lawler, an economist and housing consultant, in his newsletter last week.

FHA’s reserve fund hits 7-year low

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