FHA (aka the Federal Housing Administration) has exhausted its reserves and may need a federal bailout.
FHA has been around for 78 years, but ran into trouble in 2009 when its reserves below the 2% of loan balances ratio mandated by Congress.
FHA’s current reserves are -1.44% after a further decline in 2011.
Despite that fact, FHA insists that it has sufficient cash on hand to meet its obligations.
It’s important to understand that FHA does not issue mortgage loans; it insures them.
In 2011, FHA insured 16% of home purchase mortgages.
FHA-insured loans remain a staple of real estate financing with down payments as low as 3.5%.
FHA-insured mortgages are especially popular in the Boise real estate market, where more than 60% of our sales are in the under-$200,000 price range.
Source: CNNMoney.com article