The Real Deal Miami

FHA reserves critically low

November 12, 2009 01:11PM

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