The FHA, faced with continuing and mounting losses, is set to issue a financial analysis next week and it's not looking good. They are very likely going to have to draw money from the US Treasury for the first time in its almost 80 years of existence. In the first quarter of this year the FHA announced that delinquencies and foreclosures were up sharply, some 39% and 17% respectively, and that they were set to increase insurance premiums and impose more rigid requirements...which they did but that effort was not enough it seems.

FHA loans now comprise about 15% of all US home mortgages and even though they have taken measures to improve the quality of FHA backed loans it's too little too late to recover from the damage that was done by defaults from 2005-2008. The FHA currently insures about 7.6 million loans with total outstanding balances of about $1.1 Trillion, TRIPLE the amount of just 5 years ago.

I just can't understand the role of the FHA. I see it as basically a public assistance program for mortgages...kinda like food stamps for housing...which is as fundamentally unsound a business model as you can get. Didn't the Federal Government step in to do away with sub-prime lending via the Dodd-Frank Act? Am I missing something? How is what the FHA does any different, at it's core, than sub-prime lending? They are providing an outlet for people with poor credit scores, minimal down payment money and limited assets to buy a home. Also, further exacerbating the problem, is that Realtors and the Home Builders Association (probably include LO's too) are using it as a stimulus program of sorts rather than its intended use.

Supporters of the FHA say that they play a critical role as an insurer during a time of unprecedented housing crisis and that their lending policies are not flawed...somehow they say this with a straight face. Seems to me if that were truly the case then the FHA would not be facing yet another year of steep losses and the need to take billions in Federal money.