Financial stocks tumble on housing-market fears

Discussion in 'Wall St. News' started by ASusilovic, Nov 13, 2009.

  1. NEW YORK (MarketWatch) -- U.S. financial stocks fell Thursday as concern about the housing market was triggered by news that the Federal Housing Administration is low on cash.

    As banks and other lenders have pulled back from lending money for house purchases in recent years, the FHA has stepped in with guarantees that have become one of the leading sources of financing to prop up the housing market in the U.S.

    However, that's come at a cost, according to an independent review of the federal agency's books released Thursday. A large increase in foreclosures has pushed the FHA's reserve fund to a record-low level, it concluded.

    The FHA's reserves dropped to 0.53% of its total insured mortgages, less than the 2% required by law, the review found. The reserves measure how much capital the FHA has beyond the funds it has put aside for expected losses over the next 30 years. See story on FHA's troubles.

    If the FHA guarantees fewer mortgages, that could dent demand for houses and derail a recent stabilization in house prices. That, in turn, may be bad news for banks.

    Wall Street seems to forget pretty fast yesterdays "fears"...
  2. ?'re going to spend part of your year-end bonus on a London or NYC high-rise condo? :cool: