FHA Won't Need Bailout, Study Shows
An released this week showed that while still undercapitalized, the United States' Federal Housing Administration should be able to avoid the need for a taxpayer-funded infusion.
The agency, which guaranteed just shy of 40 percent of all US home loans lat year, has seen its funds shrink over the last year as loans made during the housing boom continued to fail. Those losses have led to increasing speculation that the agency would need to tap its credit line with the Treasury to continue operations.
At the end of its fiscal year on September 30th, the agency's capital reserves had shrunk to just 0.5 percent of the value of the loans it guarantees, well under the 2 percent the law requires and also down from 0.53 percent at the end of fiscal 2009, marking the second consecutive year that FHA's capital reserves came in under the Congressionally mandated level.
The agency has, however, taken a number of steps to improve its financial position. The study conducted this week indicates that the agency will be able to avoid the worst-case scenario of its reserve ratio falling into negative numbers.
"It's clear that FHA is in a stronger position today than we were just one year ago," FHA Commissioner David Stevens said in a statement. "While we are not yet completely out of the woods, based on the evidence we're seeing, FHA is weathering the economic storm while helping to create a firm foundation for our nation's recovery."
|
Twitter
Facebook
Del.icio.us
Digg