Article – FHA

FHA Bailout Imminent?
by Henry S. Harrison

The FHA was founded as a government agency as part of the National Housing Act in 1934. For the first time since its creation, it may require a financial bailout from the U.S. Treasury (a.k.a. the U.S. tax payers) so I thought it would be worthwhile sharing my understanding of the FHA and shedding some light on the looming bailout.

The tow major goals of the FHA is to (1) improve housing standards and conditions and (2) provide an adequate home financing system through insurance of mortgage loans. Another goal stated in the National Housing Act of 1934 was for the FHA to help stabilize the mortgage market. The Commissioner of the FHA is Carol Galante.


Historically, the FHA has done much more than insure single family houses. In 1935, Colonial Village in Arlington, Virginia was the first large-scale, rental housing project erected in the United States that was Federal Housing Administration-insured.[During World War II, the FHA financed a number of workers housing projects including the Kensington Gardens Apartment Complex in Buffalo, New York]. It also insured nursing homes. Currently, the FHA has about 4.8 million insured single family mortgages and 13,000 insured multifamily projects in its portfolio.

While a government agency seeking more funding isn’t exactly unheard of, the FHA is required by Congress to keep enough cash on-hand to cover expenses at all times. The initial estimates as to how much the FHA might require in taxpayer assistance are said to be around $943 million, according to the Boston Herald. The nearly-$1 billion dollar bailout would be for loans insured by the FHA that were posted as losses. Sen. Susan Collins (R-ME) stated, “It's of great concern to us.”

The FHA has until Sept. 30 to make a decisions as to whether or not they’ll actually require the money in order to continue operation. The Treasury, which does not require Congressional approval, would be providing the bailout which means it would be paid for by the taxpayers.

There has been suggestions that the FHA take over the running of Fannie Mae and Freddie Mac. Can you imagine what it will be like if that happened?