WASHINGTON — The number of troubled loans backed by the government’s mortgage insurance program is on the rise as economic problems mount, and lawmakers are worried that taxpayers will be stuck with the final bill.
WASHINGTON — The number of troubled loans backed by the government’s mortgage insurance program is on the rise as economic problems mount, and lawmakers are worried that taxpayers will be stuck with the final bill. Sen. Kit Bond, R-Mo., warned Thursday that the Federal Housing Administration is a "powder keg" waiting to explode, and said the Congress and the Obama administration shouldn’t place a greater financial burden on the already strapped agency. "The taxpayer credit card is maxed out," Bond said at a Senate subcommittee hearing. However, Housing and Urban Development Secretary Shaun Donovan told senators that the Federal Housing Administration is "unlikely to face the catastrophic losses borne in the subprime sector." That’s partly because the agency didn’t back loans for more expensive properties that have plummeted in value, particularly in places like California, Donovan said. As of February, 7.2 percent of loans backed by the FHA were either 90 days overdue or in foreclosure, up from 5.8 percent last August. The FHA became the main source of home loans to borrowers with poor credit and low down payments after the subprime lending market’s collapse. It allows borrowers to take out home loans with a down payments of as low as 3.5 percent, compared with 20 percent for a typical loan that doesn’t require mortgage insurance. FHA loans are made through by banks, insured by the government and sold as mortgage backed securities by Ginnie Mae, the government’s mortgage finance agency. The FHA currently backs around a third of new home loans, up from about 3 percent in 2006. President Barack Obama last month nominated longtime real estate industry David Stevens to head the FHA. Stevens is currently president and chief operating officer of Long and Foster Cos., a Chantilly, Va., based real estate brokerage. The position requires Senate confirmation. ______ Copyright 2009 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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