The Federal Housing Administration’s reserve fund has dropped below the federally mandated 2 percent ratio, down to .53 percent, according to an announcement made by officials this morning. The announcement comes on the heels of recent speculation among experts that the fund had long been growing unstable. If the reserves dip below zero, taxpayer money would automatically flow to help replenish the funds by way of the U.S. Treasury. Numerous foreclosures and consistently depressed home prices have been cited as two main causes for the agency’s fiscal woes. The bleak news has caused many to question the FHA’s current policies and to demand reforms. Edward Pinto, former chief credit officer for Fannie Mae, said that the FHA has overextended itself in the market and that a scaling back is necessary for the agency’s health. “FHA should have a limited role,” Pinto said. “It should not be 30 percent of the market.” [Washington Post] and

The Federal Housing Administration’s reserves are dangerously close to dipping below the Congress-mandated level, according to government officials. The FHA, which has been instrumental in guaranteeing loans and spurring a housing market recovery, has endured a wave of mortgage-related losses in recent months, causing some financial analysts concern. “They’re probably going to need a bailout at some point because they’re making loans in a riskier environment,” Edward Pinto, a former chief credit officer at Fannie Mae, said. “I’ve never seen an entity successfully outrun a situation like this.” The total dollar value of FHA-backed loans is projected to hit $627 billion this year, up nearly $200 billion from fiscal year 2008, while its market share has reached 23 percent in second-quarter 2009, from 2.7 percent in 2006, according to the Wall Street Journal. In June, Housing and Urban Development secretary Shaun Donovan said that a future taxpayer bailout for the FHA program would likely be unnecessary.