Federal Housing Administration Running Out of Money, May Need Bailout

If you thought bailouts were the stuff of 2008 you may want to think again.

A federal housing agency responsible for insuring hundreds of thousands of home loans may be running out of money and could soon be asking for a bailout from the government.

The Federal Housing Administration is so loaded with delinquent mortgages that its reserves are running low, according to a report from The Wall Street Journal the afternoon. The Journal, whose Nick Timiraos cites people familiar with the matter, notes that 9.6% of the FHA’s $1.08 trillion mortgage guarantees are more than 90 days past due or in foreclosure.

Just how bad is the FHA’s reserve problem? Last year the difference between its reserve amount and the money it would need if had to pay all its projected losses was just $1.2 billion , or .12% of its loan guarantees, the Journal reports. To put that in perspective, the agency is required to keep it above 2%.

If the FHA is indeed in need of a bailout then an already fragile housing recovery could be in trouble.

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