FHA Falls Below Their Reserve Requirement

This certainly doesn’t come as a surprise to me since I wrote to The Wall Street Journal about HUD spokesman Shaun Donovan comment on saying they won’t fall below.  I said that is crazy based on the environment we are in and the loans that FHA was writing.  The WSJ called me for the follow up story.

Well, now they fell below the 2% requirement.  What does this mean to buyers?  It means that it is more than likely that they will have to increase their upfront mortgage insurance premium and monthly mortgage insurance premiums.  Also, don’t be surprised if all banks raise their credit score requirements to 640 or higher seeing as some are still doing loans for score of 580.  Hmmm, I wonder why FHA is having problems?  Oh yeah, they are lending money to people who don’t pay their bills. 

“The Federal Housing Administration’s capital reserves have fallen to razor-thin levels, increasing the likelihood the agency will require a taxpayer bailout.