The Ignorant Investor
Ignorance Can't Stand in the Way of My OpinionFriday, November 20, 2009
FHA Making Risky Loans as Reserves Dwindle
The New York Times is reporting today that the FHA is underwriting loans at quadruple the rate of three years ago, and has decided to insure mortgages on very expensive homes.
The borrowers that the Times reporter uses to put a human face on the story are three guys with no money who borrow over a million dollars to buy a two-unit apartment building in San Francisco. They don't need a down payment because the FHA is insuring the loan. Meanwhile, the reporter says, the FHA has dwindling reserves to cover defaults.
Craziness. The FHA will need a bailout in the next year, is my prediction.
[Update: Okay, it's the spring of 2011 and I got this wrong. No bailout in 2010]
The borrowers that the Times reporter uses to put a human face on the story are three guys with no money who borrow over a million dollars to buy a two-unit apartment building in San Francisco. They don't need a down payment because the FHA is insuring the loan. Meanwhile, the reporter says, the FHA has dwindling reserves to cover defaults.
Craziness. The FHA will need a bailout in the next year, is my prediction.
[Update: Okay, it's the spring of 2011 and I got this wrong. No bailout in 2010]
posted by Worker 17 # 9:25 AM 
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