Summary
While the FHA's market share has skyrocketed since the real estate bubble burst, the FHA has also been facing rapidly increasing losses that are likely to outstrip its reserves. A taxpayer bailout is looming.
Analysis
The already shaky finances of the FHA have been further perverted by politicians united to contort every instrumentality of government in the hope of minimizing our severe economic downturn. As a result, prudent risk-based pricing and sensible business practices are being thrown overboard at the FHA, as well as at Fannie Mae and Freddie Mac . The housing credit, and myriad other governmental efforts to re-inflate the bubble, are exacerbating the risk.
An FHA bailout will be difficult to avoid, even if prospective underwriting standards are improved and premiums are increased.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
