Will the FHA be next to get a bailout
Jimmy commented yesterday about the problems at the FHA (Federal Housing Administration) and if that source of loans becomes unavailable, it could lead to another leg down in the housing market. After all, FHA loans have been a main source of mortgage funds for the past several years because of the low down payment requirement of just 3.5% but FHA capital reserves are almost depleted.
Don't worry.
The government (oops, the taxpayers) will bail out the FHA if necessary just like it bailed out Fannie Mae and Freddie Mac (or made them wards of the state) because neither Congress nor the Administration wants to see anything destabilize the housing market.
Rep. Scott Garrett, R-NJ submitted a bill recently that would raise minimum down payments to 5% which the FHA opposes and it's just my opinion but home buyers with a "little more skin in the game" might be more responsible home buyers. We're not talking about a return to minimum 20% down payments, just saving slightly more to be able to make a more serious down payment.
The WSJ has an interesting article on the political debate about the role of government in the mortgage market.