But what does that really mean?
Ask HUD officials, and they'll claim not a whole lot. They don't go to Congress and ask for money; they don't go to the Treasury and start taking additional money. They do move some money around and they do face heightened political pressure and heightened scrutiny from the hoards of housing watchers who think government needs to get out of the housing industry's business.
FHA has gone from about 2 percent of the housing market to approaching 40 percent in just a few years. It now guarantees one in five single family loans. In turn, the estimated amount of earmarked loss reserves necessary to cover expected net losses on future cash flows went from $14.3 billion last year to $27.1 billion this year. Now FHA operates with something called "permanent and indefinite budget authority," which means it can tap the Treasury's ATM whenever it needs to.
Now we can go 'round and 'round arguing what is and what is not a "bailout" and whether the FHA would ever need to get more money to cover loan losses, but all of that makes my head spin. The real news out of today's actuarial report was nothing in the report itself. It was the blatant uncertainty regarding the current and future health of the housing market displayed by two of the top housing officials in the nation, Secretary Donovan and FHA Commissioner David Stevens.
And I don't blame them.
Today's release was actually delayed a week, after some numbers came back that didn't quite fly at the beginning of last week. The issue surrounded some "scenarios" above and beyond what the actuarial usually do, that were specifically requested by Donovan and Stevens. These scenarios ran the numbers with much deeper home price drops, much higher levels of unemployment and higher foreclosure rates. Why did they run them? Because they wanted to cover all the "just in case" bases. Donovan told reporters and industry members at today's conference that these were barely 1 percent possible, really worst-case-scenarios.
But when one reporter asked Donovan what his vision of the housing recovery is, he didn't seem quite so certain. He said the following:
"We are in an extremely volatile period."
"There is still a lot of volatility."
"We are still in uncharted territory."
Not exactly words I tell my kids when the thunderstorm is supposedly passing.
In an interview with me following the presser, David Sevens added, "We didn't do it [the extra scenarios] because we believe it is possible; we wanted just to be prudent, particularly with the extensive focus on the real estate finance industry in general and the new found focus on FHA."