Because that is what happens when you throw good money after bad:
The Federal Housing Administration, which propped up the collapsing housing market last year, acknowledged yesterday that it has drained its cash reserves to dangerously low levels, heightening concerns that it might need a taxpayer bailout.
The agency, which guarantees loans for many first-time homebuyers, could be hit if housing prices lose ground or if a new wave of mortgage defaults, triggered by double-digit unemployment, crashes into the market in the coming months.
If the FHA runs into financial trouble, it could make it more difficult for borrowers to get loans, particularly first-time buyers.
Housing Secretary Shaun Donovan said while an independent audit showed that the FHA burned through its backup fund as defaults and foreclosures spiked during the mortgage crisis, the analysis also showed that the agency should remain solvent under “most economic scenarios,’’ including higher unemployment and mortgage defaults.
Which is Donovan whistling past the graveyard because the expectation is for higher defaults, increased foreclosures, lower prices and higher unemployment in 2010. “Most economic scenarios” is probably “most of the stuff we spun back in February about the stimulus”.
The crash in FHA is coming – the next Freddie and Fannie.
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