FHA Announcements

FHA fell below is legislated requirement to have 2% in excess capital for reserves above and beyond forcasted losses. Being below this 2% requires the FHA, by law, to make changes to get the funds reserves back over 2%.

Virtually all of the losses are from 2006, 2007, and 2008 book years. These are the worst years in the housing crisis from an origination standpoint and they contained programs like the SFDPA (seller funded downpayment assistance) that have extremely high default rates.

The changes announced today will get the reserves up and put in place some controls to protect the fund and FHA for the long term, while making sure not to overly, adversely, impact this housing market at a critical time.