Nearly two-thirds of FHA borrowers that took out loans over the past year have less than 5% equity in their homes, illustrating the risks that just a 5-10% decline in home prices could have on the agency’s reserve funds.If two-thirds of recent FHA borrowers find themselves underwater, is it ethical for them to walk away leaving Uncle Sam with the bill?
Critics say the agency is doing no favors to taxpayers or new homeowners by providing relatively easy loan terms. “Insofar as the FHA was encouraging people to buy homes in bubble markets that were not deflated, that’s not good for the FHA and you didn’t help the homeowner,” says Dean Baker, co-director of the Center for Economic and Policy Research, a liberal think tank.
Friday, June 11, 2010
Thin ice and the FHA
Will home prices fall another 5%? WSJ on the FHA: