Next up on the bailout parade? The FHA, probably:
The Federal Housing Administration, which backs about a third of U.S. home loans, could require billions of dollars in taxpayer aid if the housing market continues to deteriorate, a Republican lawmaker said.
The agency, which provides liquidity by protecting lenders against borrower defaults, could follow in the footsteps of Fannie Mae and Freddie Mac, the mortgage companies that were taken into government conservatorship in 2008, Representative Jeb Hensarling said at a House hearing today.
“FHA is a disaster in the making and if we don’t do something it may become the next Fannie and Freddie,” said Hensarling, the fourth-ranking House Republican. “If the FHA was a private financial institution, likely someone would be fired or fined and the institution would find itself in receivership.”
As somebody once put it: FHA is the new sub-prime. And whatever’s below subprime, that’s where it’s headed. Why? Congress is authorizing the FHA to up the size of the mortgages it will back from $625,500 to $729,750 (which many Republicans rightly opposed), and it’s doing the occasional near-billion-dollar deal, including building a hospital in Trenton, N.J. (Yes, you’re right, FHA stands for Federal Housing Administration, not Federal Hospital Administration. No, I couldn’t begin to guess how they justify that.)
So, a growing portfolio, increasing its risk exposure, expanding its operations: FHA must be flush with cashola, right? As it turns out . . .
Last month, an independent actuarial analysis concluded that the net worth of the fund stood a 50 percent chance of falling to zero or near zero, which could force it to seek taxpayer support for the first time.
Oops.
The Obama administration is going to spend the next week trying to convince you that today’s employment numbers are good news rather than bad news. But keep the housing market in mind when the president tells you the sun is shining on the job market: What coordinates highly with mortgage defaults isn’t being upside-down or seeing a large drop in your home value — what coordinates highly is being unemployed. Housing continues to tank, and it is tanking hardest in those cities that had the worst reversals in the job market. Reports the Financial Times:
The worst house price falls were in those areas scarred the most by high unemployment and foreclosures. Three cities posted new lows since the first reading of the index in 2006 – Las Vegas, Atlanta and Phoenix.
“It is a bit disturbing that we saw three cities post new crisis lows. For the prior three or four months, only Las Vegas was weakening each month,” said Mr Blitzer. “Now Atlanta and Phoenix have fallen to new lows too.”
Hey, Barack Obama voters in Atlanta, Phoenix, and Las Vegas: Are you better off than you were four years ago? I think not.
But conservatives should remember to ask the follow-up question: Hey, constituents of Harry Reid, John McCain, and Saxby Chambliss: Are you better off than you were four years ago? Conservatives are focused, with good reason, on Barack Obama, but it’s Congress that writes the budgets, Congress that writes the regulations, and Congress that is going to have to take the lead in getting the economy back where it needs to be. And it’s Congress that just upped the FHA loan limits, which are now higher than Fannie Mae’s and Freddie Mac’s — something John Boehner never should have let see the light of day.
A republic, guys — not a bank, not an insurance company, not a hedge fund: a republic. If we can keep it.