Actually, it's the Senate that wants FHA to improve their bottom line. Why is this important? Well, FHA loans are now 37% of the loan market and FHA delinquencies continue to grow.
FHA insures that if a buyer comes in with a low down payment, it will insure to the bank up to 20% of the loan to value ratio, mitigating the loss to the bank. Also, FHA has taken up the role of the sub-prime lender in some cases. If this program is not financially sound, then up to 37% of the buyers might disappear and the tax payers might be on the hook to bail this program out. Fannie Mae is also trying to start up sub-prime sales.
"We should all have a concern of FHA, and I am concerned about it. 2007 and 2008 were terrible books that were originated with limited scrutiny, and we are going to pay the price on those books for some time to come," Stevens said. "We are absolutely not out of the woods."Read it all