As has been widely speculated, the Federal Housing Administration is in serious financial trouble. It admitted as much yesterday. From the Boston Globe:
Representative Barney Frank of Massachusetts, chairman of the House Financial Services Committee, said he’s concerned that higher unemployment could curtail the agency’s ability to back loans. “We’re just going to keep watching them carefully’’ to determine whether they need congressional help to stay above water, he said.
Frank also said he has proposed taking $2 billion from funds repaid after the Wall Street bailout to “lend money to people facing foreclosure because of unemployment. I am pressing hard to get that done. I believe we can substantially reduce that second wave if we do that.’’
Yep, that’s the solution to the problem — put marginal borrowers further into mortgage debt by putting taxpayers further into bonded debt.