People better start paying attention to Tim Geithner's premonition about the US turning into a nation of savers. Not because they've learned their lessons about spending what they don't have. But because when taxes go up, they may be going up by a little more now thanks to the FHA. Who would have guessed that the quadrupling of mortgages insured since 2006, approved without credit score standards and requiring as little as 3.5% down, could lead to trouble? But the impossible happened and now the FHA may need to turn to taxpayers for a $54 billion bailout. The problem looks pretty serious. So serious in fact that the FHA has taken drastic steps to stop the bleeding.
For the first time in its history, the "largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934" has decided that a year and a half into the housing crisis and 75 years since its creation, the time has come to create the position of Chief Risk Officer. Ok, it took them three-quarters of a century to change their ways. Chalk it up to better late than never. TG should take notice. In the end, time may not be the enemy of reform.
FHA's $54 Billion in Losses May Require Bailout, Pinto Says [Bloomberg]