Another Government Housing Fund Broke

Tuesday, November 17, 2009 1:15 PM

By: Dan Weil

The Federal Housing Administration’s reserves are shrinking rapidly, creating a big problem for the housing market.

That’s because the agency has played a huge role in buoying that market. It insured lenders against mortgage defaults on 20 percent of homes bought in the last year.

The FHA’s capital reserve fund plunged 72 percent in the year ended Sept. 30. That means reserves have dwindled to virtually zero on the $685 billion in loans insured by the agency.

“There is a real risk. Nobody has a crystal ball,â€