The government's mortgage insurer is coming dangerously close to holding no excess cash reserves for loan losses.
An annual independent actuarial report puts the FHA's loan loss reserves at .24% of its $1.1 trillion dollars in insured mortgages.
The FHA, which does not originate loans, but insures them, has gone from less than 5 percent market share at the height of the housing boom to now more than 30 percent. The auditor measures the FHA's reserve by estimating future losses, and those estimates continue to grow as home prices fall and mortgage delinquencies still run very high.
The FHA's estimated reserves stand at $2.6 billion as of September 30th, according to the report, down 45 percent from $4.7 billion last year. Congress mandates that the FHA's reserves must be at least 2 percent of its total insurance in force, but it hasn't been at that level for a few years now. Auditors estimate it will not be back above that level until 2014, and that would be based on the current book of business.