FHA bailout program may require a bailout

The U.S. Federal House Administration, an increasingly important guarantor of home loans, may require a bailout of its own, an industry analyst said.

Congress revamped the FHA last year by giving it more flexibility and range to insure mortgages during the housing crisis. As such, it now insures 23 percent of all new U.S. mortgages, up from 2.7 percent before the subprime and foreclosure crisis, Inside Mortgage Finance reported.

They’re probably going to need a bailout at some point because they’re making loans in a riskier environment, mortgage consultant Edward Pinto, a former chief credit officer at the Federal National Mortgage Association, told The Wall Street Journal.

The economy, however, has not recovered fast enough to keep the FHA’s cushion intact.

The Mortgage Bankers Association said 7.8 percent of FHA insured loans were in default — 90 days late on payments — or in foreclosure, the Journal reported Friday.

A year ago, with a far smaller presence in the housing market, FHA defaults stood at 5.4 percent.

By federal mandate, the agency must keep a reserve equal to 2 percent of its insured loans.

In June, Housing and Urban Development Secretary Shaun Donovan said the FHA would not require additional funding.