Yes, is the answer to the question posed in the title of this report. That will seem a brave conclusion to some, given that the Federal Housing Administration (FHA) has not needed a direct recapitalization from Congress since its founding over three-quarters of century ago. However, it is highly likely, given FHA's current condition.
FHA's present state is precarious. For the past two years, it has been in violation of its most important capital reserve regulation, under which it is supposed to hold sufficient reserves against unexpected future losses on its existing insurance-in-force. To be barely compliant with this rule would have required just over a $12 billion capital infusion in fiscal year 2010, and that presumes that future losses are not being underestimated by FHA. This report suggests that they are by many tens of billions of dollars, so that the recapitalization required will be at least $50 billion, and likely much more, even if housing markets do not deteriorate unexpectedly.
Read the rest of the article at the American Enterprise Institute
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