EZ-pass bailout for housing agency

Automatic overdraft protection for the FHA

Automatic overdraft protection for the FHA

The Federal Housing Administration is burning through its cash reserves like mad — no surprise given the collapse of the housing market. But it won’t have to face Congress to beg for more dough like most corporations.  It can just keep writing checks, courtesy of the US taxpayer, and keep on going. According to the borrow-and-go story in today’s Washington Post, the agency keeps excess reserves in an account at the Treasury:

The government is legally required to ensure that the balance in the FHA’s emergency reserve fund does not drop below 2 percent of outstanding FHA loans. Over the past five years, starting during the years of the housing boom and continuing into the bust, FHA’s reserves have tumbled and are now below that threshold, according to the agency.

Under a 1990 law, the FHA turns over to Treasury each year whatever excess money the agency expects to have left over after it pays losses on insured mortgages from what is known as the financing fund. The excess money is credited to the FHA’s emergency reserve fund. In those years when the FHA underestimates its needs, it automatically gets an infusion from Treasury to make up the difference.

via FHA’s reserve fund hits 7-year low – washingtonpost.com.

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3 thoughts on “EZ-pass bailout for housing agency

  1. Pingback: Tuesday links: hedge fund funding Abnormal Returns

  2. Pingback: Tuesday links: hedge fund funding | Financial engineering resource center

  3. Pingback: Tuesday links: hedge fund funding | Financial engineering resource center

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