Because they insured the banks against loss if the loans went bad, they had to pay off a lot of money. Like any insurance company, if you have to pay out more than you collected in insurance premiums, you are in trouble.
That is what is happening to FHA. Since 2007, they have been the main supplier of loans, The next step is tapping into United States Treasury funds. Ouch!!! Be prepared for higher FHA loan costs- Another stumbling block to homeowners who are already spending their last dime for the American dream. In addition, the policy of allowing homeowners to stop paying MIP (Mortgage insurance premiums) when the property value increased is going bye-bye. You will pay FOREVER!!. They also say they are going to streamline the short sale process. I will believe that when i see it.
FHA is also getting flack for the new programs of lending to people to already defaulted 3 years before.
FHA insures more than one trillion dollars of loans. It may be broke but it should be fixed. FHA has been the lifeline for millions of people and it worked well for many years. Before 1986, you did not even have to qualify at all, and it still worked. So what went wrong? … Your Comment …
I can’t believe FHA is broke:
1) they raise the insurance premiums constantly, they are extremely high now
2) nobody used FHA before 2007 when the values were inflated, they were full doc, too strict and the loan amounts were too low (they only used to go up to high $300’s prior to 2008)
3) I think government needs to do a 3rd party audit of HUD’s management of FHA program
Yes a lot of people in other states may have gone belly up because they lost their jobs but that would happen no matter how much you pre-screen someone. Why don’t they get more creative and let people assign their loans like Bruce Norris suggested or sell the loans/properties to investors (not hedge funds)?
With the direction I’ve seen our current government lead housing sometimes I wonder if they could hit water from a boat…
They are broke because they had to stand behind the bad loans. They are an insurance company. They are changing the rules so that they won’t have to do this in the future if there is fraud.