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Taxpayers Could Face (Previously Undisclosed) $115 Billion Losses From FHA
In yet another hit for both the administration's trustworthiness and the hope of some spin-off of the GSEs, the WSJ reports that the Federal Housing Administration's projected losses over 30 years could reach as high as $115 billion under a previously undisclosed stress test. The results, which were not included in the agency's independent actuarial review (because of the potential uproar it might create according to emails), are based on the Fed's stress-test scenario - which seems like something that should (perhaps) have been included. The fact that this data was omitted from the report is "troubling" to House Oversight Committee head Darrell Issa. In its annual audit, the agency disclosed that under current conditions, total losses would exceed its reserves by $13.5 billion over 30 years (with a $943 million loss this year alone). The projected shortfall under a 'protracted economic slump' is $64.5 billion but the 'tail risk' event, that was originally included in earlier drafts, based on the Fed's stress test, is $115 billion. Hardly the upside-encouraging potential that private-finance will be looking for in funding FEDMAGIC.
Via The WSJ,
The Federal Housing Administration's projected losses over 30 years could reach as high as $115 billion under a previously undisclosed stress test conducted last year to determine how the government mortgage-insurance agency would fare under an extremely severe economic scenario, according to documents reviewed by a congressional committee.
The forecast was significantly worse than the most severe estimate included in the agency's independent actuarial review that was released last November.
...
In a letter sent last week, Mr. Issa asked Carol Galante, the FHA's commissioner, why the agency hadn't disclosed the figure, which he called "troubling."
...
In its annual audit, the agency disclosed that under current conditions, its projected total losses would exceed its reserves by $13.5 billion over 30 years.
A more recent analysis, released in April by the White House's budget office, showed that the agency would require $943 million this year due to losses in the agency's reverse-mortgage program
...
Emails reviewed by the House committee suggest that the FHA didn't want the bleaker forecast included due to the potential uproar it would create.
...
Last fall's annual report included several stress scenarios, but none of them showed losses as large as those contemplated by the Fed's stress-test methodology. Its most severe estimate of losses under a "protracted" economic "slump" would have resulted in a projected shortfall of $65.4 billion.
...
Emails from FHA officials to IFE analysts in April 2012 initially floated the idea of using a stress-test scenario like the one conducted by the Fed in order to measure the costs of big unforeseen shocks, known as "tail risk." ...
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Little bad bank become big bad bank.
Meh, you win some you lose some. Benny keeping us net green with his mega hedge fund
Who cares? As long as they continue to guarantee zero-down mortgages banks hand out to anyone who can Fog a Mirror no one cares. There'll simply be more Defaults, Free Liv'n and Just Walk'n Away when the time comes an dlots of Foregiveness.
3.5% down and low FICO. EVERYONE was expecting huge losses, but FHA is hiding something.
http://confoundedinterest.wordpress.com/2013/06/04/fha-losses-could-reach-115-billion-stress-test-in-extreme-scenario/
1, 115 billion. Just multiply govt estimates X 10. Fixed it....
That's the gameplan.
Small banks, ineligeble for assistance, merge with other small banks about to collapse. The result is one mega bank, with mega bad finances, which IS eligible for assistance (aka "systemic risk").
Ie Bankia in Spain.
Bankia. Now there's the product of a warped mind...
115 Billion is peanuts... thats less than 2 months of QE... Pfffft!
Record bonuses all around for FHA, FNMA, FHMLC!
I would love to see the gallows be brought back out .... any A-hole responsible for losing more then $10 million gets a choice - gallows, the rack, or the guillotene .... unless they can pay it back within 90 days.
Any Government A-hole that lost less then $10 million gets to forfeit his wealth (pension, benefits, house, car).
I think we should start off with Barney Frank, Raines, Dowd, and the rest of the A-Holes.
Bawny Fwank and A-holes in the same sentence!
Its a good thing he didn't bring up dickHolder.
115 billion!!!
no problem...I'm sure US debt slaves r good for it....
I am laughing because I would otherwise be crying.
Shit, Uncle Ben prints more than that in two months! Get back to me when we're talking real numbers, like trillions.
Not exactly a surprise. FHA just increased the monthly MI factor to 1.3% (vice 1.2%). UFMIP remains at 1.75% Here's the kicker... if you use an FHA loan to buy or refinance your house and you initially have less than 10% equity (90%LTV) the monthly MIP for a 15 year or 30 year loan never goes away. This went into effect yesterday. You'll have MIP for the entire life of the loan unless you refinance out of it. For loans with more than 10% equity (< 90% LTV), the MIP doesn't go away for 11 years regardless of your home's value (currently MIP is removed at 78% LTV). So say you put almost nothing into a house now and lock in a sweet ~3.75% interest rate. Then rates go up as they will need to do. You can't refi out of that FHA loan to get rid of the MIP no matter what because your new interest rate will offset any savings on MIP. Congratulations, FHA has just turned you into a permanent stream of revenue.
Beautiful...Angelo must be their top paid consultant.
Sorry, that first figure isn't correct. Monthly MI is now up to 1.35% for a 30 year loan (>95% LTV).
That figures... And of course they're fully disclosing this new bit clearly and upfront, right? Fuckers......
Sort of, there's one of the most laughable disclosure forms I've ever seen that covers it. It's called the "Informed Consumer Choice" disclosure. It shows you how FHA loans compare with conventional loans. The only problem: the form gives a standard example (always a $100,000 house) and doesn't tell the customer dick about their particular scenario. The actual MI factor doesn't come up again but you can see what the MIP payment is on the actual loan application. The trouble is, try finding a loan officer that knows what MIP actually is, how it works, and how it's calculated (even if they know the monthly factor and the loan amount most still can't figure this out).
Thankfully once Keynes destroys the entire world we can rebuild it and have some jobs.
From Pyramids, to cotton fields, to Wrigley Fields, to, at long last, paying down the debt, the ultimate purpose of life.
http://goldsilverbitcoin.com
With all respect to Keynes, we ARE only Keynesian during the downturn.
Through the upturn, Keynesian economics go right out the window, as governments are supposed to tighten finances - and who wants to do that?
who cares!?! Just print moar!
just add it to the tab - i don't work a salaried 60 hours a week for nothin! /s
Thats a lot of paper.
No suprise here. I'm in the business and have been wondering over the last few years when some of the ugly FHA financial info would finally get out. Here's the fun part. Now that the info is out, how much do you trust that these numbers are accurate? LOL
"More and more people own their homes in America today. Two-thirds of all Americans own their homes, yet we have a problem here in America because few than half of the Hispanics and half the African Americans own the home. That's a homeownership gap. It's a -- it's a gap that we've got to work together to close for the good of our country, for the sake of a more hopeful future.
We've got to work to knock down the barriers that have created a homeownership gap.
I set an ambitious goal. It's one that I believe we can achieve. It's a clear goal, that by the end of this decade we'll increase the number of minority homeowners by at least 5.5 million families. (Applause.) … And it's going to require a strong commitment from those of you involved in the housing industry."
- President George W. Bush addresses the White House Conference on Increasing Minority Homeownership at The George Washington University Tuesday, Oct. 15, 2002
And it's going to require a strong commitment from those of you involved in the housing industry.", that or those who love anal play sans lube.
This was how the President promoted the FED chairman's housing bubble.
In September, 2004, the FBI warned congress of MASSIVE mortgage fraud. It was an ELECTION year and nothing was done about it.
It is all a game to these politicians and they don't care who gets ruined in the process.
bernanke can fart out $115B in matter of nano-seconds.
"The results, which were not included in the agency's independent actuarial review (because of the potential uproar it might create according to emails)"
Can't even trust an INDEPENDENT actuarial review.
All fraud, all the time
Why am I not surprised in the least?
And the FED continues it's $40+ Billion per month of MBS purchases, as Fannie/Freddie exec.'s make money hand over fist.
PONZI!
Federal Housing Administration's projected losses over 30 years could reach as high as $115 billion under a previously undisclosed stress test.
Federal Housing Administration's projected losses over 3 years could reach as high as $115 billion under a previously undisclosed stress test.
There fixed it for ya
The FHA is into reverse morgages too? Reverse mortgages? That's one step above Vinny the loan shark or a payday loan.
Reverse-mortgages, because what the fuck did your survivors ever do for you?
The FHA was like set up as a slush fund. Read this one by Cathrine Austin Fitts. Some real good background. in that area.
HUD is a Sewer
http://www.dunwalke.com/7_HUD_is_a_Sewer.htm
Note, at bottom of article, click previous and read the whole story.
EXCELLENT LINK, Glad you posted this. I believe everyone on ZH should read it.
Not to worry - Congress spends this amount every 10 days. The Fed will just print some more money to cover it. No one will notice it. This is just like an extra month of Congressional overspending.
Add more episodes of American Idol so the sheeple won't notice.
When your latino gardener bought a house, sell your house.
When Sandi prince bought US stocks, sell your stocks.
i'm sick of being a taxpayer; i quit.
Only $115 billion over 30 years? It takes a number like $115 trillion to get me worked up any more!
Who needs to cover up for $115B? I could probably fish that amount out from under the sofa cushions in Ben Bernanke's outer office waiting room.