Is a Massive FHA Taxpayer Bailout on the Horizon?

The FHA is nearly broke. It appears that another massive bailout is on the horizon:

The FHA insurance program is materially undercapitalized and will require a capital infusion of $50 billion to $100 billion in the next few years – even if housing markets do not deteriorate any further. The study was written by Joseph Gyourko at the University of Pennsylvania Wharton School, and is titled “Is the FHA the Next Housing Bailout?” Describing the FHA present state as precarious, Gyourko says for the past two years the nation’s 77-year old insurer has been in violation of its capital reserve regulation. The reserve is supposed to hold sufficient reserves against unexpected future losses on the insurance it has issued. To comply with this rule would require a $12 billion capital infusion in fiscal year 2010, his research found, and that presumes that future losses are not being underestimated by FHA.

And last year New York University and the New York Federal Reserve issued a paper warning of the growing likelihood the FHA would need a taxpayer bailout.