There's a growing consensus in America that the long-suffering housing market has reached bottom and is now mounting a recovery. Housing starts surged 15 percent in September to their highest level in four years. New home sales in the same month rose 5.7 percent to their highest level in two years. And the Zillow Home Price Index shows that home prices are up 3.4 percent from a year ago.
While these are welcome trends, figures released today from the Federal Housing Administration (FHA) throw a sobering splash of cold water. FHA's FY 2012 Actuarial Study for its main single family program shows that its capital position has turned negative, by $13.5 billion. That's a shift of $23 billion in economic value in a single year, and it puts the 78-year-old agency $34.5 billion short of its legal capital requirement.
If it were a private company, it would be shut down.
It's bad enough that FHA may be forced to seek a taxpayer bailout, just months after acting FHA Commissioner Carol Galante told Congress that "FHA is not broke." What's worse is that the agency's mounting fiscal problems portend deep trouble for the housing market and the American economy as a whole.
Read More: http://www.theatlantic.com/business/archive/2012/11/the-next-housing-bailout-big-trouble-brewing-at-the-fha/265359/