FHA’s capital is being depleted rapidly, as the rate of borrowers now 3 months behind on their loans has jumped from 6 to 9%.
Congress requires that FHA have at least 2% in capital reserves to meet the possibility of increasing foreclosures. In the most recent report, FHA had only 0.53% in reserves. New fees are promised, lending standards will be tightened, horses will be led back into the barn: you know the drill!
So, the number of foreclosures is likely to continue rising, the FHA will be back for more cash from Uncle Sam, and house prices will continue falling.
Eventually, supply will meet demand at the bottom, perhaps by 2011-2012.
Gorilla says: “Sadly, an FHA a day keeps Obama in play!”
