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-- thought we -- sort of past the worst of the housing prices the Federal Housing Administration is on the verge of needing a bailout.
And -- Liz MacDonald called this back in 2009 but our next guest says.
This rescue needs to be a top priority in Washington to make sure the housing recovery isn't derailed.
Joining us now Susan -- -- -- professor at university of Pennsylvania's Wharton school of business.
Like I said Elizabeth new this back in 2009 and we all kinda knew this eventually was gonna happen it would really the only agency -- -- -- hasn't asked for a bail out.
So why haven't we been prepared for this.
Well it's hard to take steps to.
Prepare they Arab low on reserves of the reserves are likely to go lower.
And they need by sector to have 2% reserve so we're waiting on the report the report is likely to be out.
Friday but it's expected to be negative which means that.
They're gonna need -- cash infusion that they failed -- that 2% capital ratio requirements.
Over the last three years they have failed before.
At that point I though I guess they were able to res insurance premiums to cover the difference are you saying they can no longer do that.
No they can do that that's an alternative there really is a range of steps if this is negative that can be taken.
They can automatically get cash from the treasury or they can take steps themselves like raising the insurance premium yet again.
Or in fact.
Making their future books of business even -- they've already take steps taken steps along those lines.
But -- tradeoffs here.
The loans in 2008 and 2009 that there backing are just unfortunately over ninety days delinquent at best.
Their loans going forward you're seeing are a little bit better so -- book of business going forward could potentially offset.
Any of the damage done in the past not -- a lot of the taxpayers have to come in on this.
That's exactly right we don't know this is the question reserves for the future their current loans that they're underwriting are far safer than in the past funds.
But nonetheless the past loans are coming -- right now you know they ramp up in 20072008.
-- -- 2005 to 2008.
Loans that are really hurting right now it's a surprise that they haven't.
That they haven't needed reserve didn't need the call for taxpayer fusion before this every other as you said have -- account for 78 years without requiring.
Any taxpayer assistance but they've been through.
105 that you're storm this is going to have to take -- -- and -- and -- they're gonna have to make changes which the problem is.
-- they could themselves make changes -- that would hurt the overall housing market.
If they ratchet up their lending standards in the world -- and as we know across the border to tight.
This could -- the market and come back to bite them as well.
And I have I have about ten seconds left but it seems basically you're saying and of course we'll find out Friday they're gonna have no choice but to do that.
Either that or get -- -- -- cash for treasury which automatically happens you don't need any act of congress.
Taxpayers on the hook again Susan -- -- thank you very much for explaining on the letter it.
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