Go figure. FHA borrowers are defaulting at a 30% faster rate than non-FHA borrowers. Shocking!
Since the FHA only requires a 3.5% down payment and the seller can chip in 3-6%, home buyers can move into a home for…drum roll please… all together now… Zip, Nada, Zero! Not much skin in the game huh?
The FHA is facing mounting losses but officials claim they won’t need a cash infusion unless the economy slips back into a recession. The FHA’s reserves for defaults has dropped to $3.6 billion. But it’s OK because at least they know they have a problem; Housing Secretary Shaun Donovan says, “It is critical that going forward, we build that cushion back up.”
Ok, riddle me this and see if our officials are smarter than a 5th grader. Currently, there are $685+ billion in outstanding loans and 17% of these loans are in default. How much money does the FHA need to have in the drawer to cover their losses? Survey says…$89 billion, ding ding ding you win! Wait didn’t they say they only have $3.6 billion. Houston, we have a problem.
What do you think we should do?!?
- The Bank Slayer
[...] wreck,” noting that a “flag will go up in the next couple of months” for bail out money. As we pointed out last week they don’t have anywhere close to the reserves necessary to cover the current number of [...]