Another Housing Bailout?

By the looks of things, the Federal Housing Administration (FHA) may now need a taxpayer bailout to stay afloat.

From Fox Business News:

According to the HUD inspector general, the FHA, which has virtually no strong oversight against fraud, now backs $560 billion of mortgages. That’s four times what it was insuring three years ago.

Last summer, HUD’s Inspector General issued a withering report on the FHA, finding that its default rate zoomed to 8.4%, almost triple what the big banks and mortgage lenders say is safe; most recent data available shows nearly one out of seven of these loans were more than a month delinquent, headed for default.

The FHA provides a portrait in miniature of the twilight years of the credit mania: it expects 24% of its 2007 mortgages and 20% of its 2008 mortgages to go into default.

But the crowd running the FHA let its rainy day reserve fund shrivel to $30 billion to support its business, a cushion that has halved to 3% from 6.4% in 2007, and a cushion that is set to fall below 2%, HUD says.