The Federal Housing Administration has a big problem — and the bill is about to come due

With the presidential race entering the homestretch, most of the political world is wondering: Will there be an “October surprise”?  But this year the real surprise may come in November, when the American people learn about the need for a taxpayer-funded bailout of the Federal Housing Administration (FHA).

The FHA guarantees mortgages on loans made by FHA-approved lenders throughout the United States and insures mortgages on single-family homes. Traditionally, it has participated in a fairly small segment of the overall mortgage market. In 2006, the FHA’s market share was just 5 percent. But as credit availability tightened and underwriting standards became more exacting, the FHA’s share of the market exploded to 30 percent of all new mortgage loans. Why is this significant to taxpayers? Unlike the case with conventional loans, when an FHA borrower defaults on his mortgage, the American taxpayers have insured 100 percent of the value of the loan and will be forced to cover any losses on it.
The FHA’s increased market share has not been a good thing for taxpayers. One-sixth of all FHA loans were delinquent as of August 2012. This translates to over 1.2 million borrowers who have missed at least one payment. Even more ominously, 58 percent of the delinquent loans were “seriously delinquent,” which means that almost 10 percent of all FHA borrowers had missed three consecutive months of payments or are now in foreclosure.

Read more: http://www.nationalreview.com/articles/329370/obama-s-november-surprise-dan-murphy