Audit: Federal Housing Administration might need a bailout

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There’s about a 1 in 2 chance that taxpayers will have to step in and save the FHA, an audit found..

There is almost a 50 percent chance that the Federal Housing Administration (FHA) will need a taxpayer bailout, according to a government audit released today and reported by the Los Angeles Times. [1]

The FHA’s cash reserves are being depleted by the foundering housing market. The FHA insured about one in seven residential mortgages insure this year, according to the audit.

The reserves, which are not supposed to be below 2 percent of projected losses, continued to fall this year, dropping to 0.24 percent from the already seriously low level of 0.5 percent last year, the report said. The drop was caused by the FHA's cash reserves falling by $2.1 billion, to just $2.6 billion.

Read more about the bailout speculation here [1].