Rod's Blog

In my Novermber 28 2008 blog post entitled "FHA- Heading for Trouble?", I opined that FHA seemed to be repeating sub-prime mortgage mistakes and could become the next fiscal black hole. 

No doubt now, FHA is in trouble. While the commissioner of FHA says no tax payer money will be needed for a bailout, others disagree. The NY Times reports the following (emphasis added by me):

" “It appears destined for a taxpayer bailout in the next 24 to 36 months,” the former Fannie Mae executive, Edward Pinto, said in testimony prepared for the hearing. Mr. Pinto, who was the chief credit officer from 1987 to 1989 for Fannie Mae, predicted losses on its mortgage insurance would more than wipe out the agency’s reserves.

Much is at stake. In addition, principal and interest on mortgage-backed securities containing F.H.A.-insured loans are guaranteed through the Government National Mortgage Association, known as Ginnie Mae. That means the taxpayer is responsible if the mortgages underlying those securities fail." "

----

So, who do I believe... the FHA commissioner who says no bailout will be needed, or the other who says taxpayers will likely be on the hook to save another mismanaged government agency?

Easy pick. Hold on to you wallet if you can..

For the complete story, follow the link.

http://dealbook.blogs.nytimes.com/2009/10/08/is-fha-the-next-shoe-to-drop/