An article in The Wall Street Journal 11/15/11 about the Federal Housing Administration or FHA “Loan Backer’s Cash Runs Low” states that an audit being released today that FHA has close to a 50% chance of running out of money and require a tax-payer bailout. This follows the 10/23/11 news that PMI group the third largest mortgage insurer was taken over by Arizona regulators, and is no longer selling new business. MGIC the largest of these insurers reported larger losses than expected last month. Old Republic International Group, another of the insurers of mortgages was also restricted to selling new business recently.
Private Mortgage Insurers protects lenders if a borrower defaults, and the home is sold for less than the outstanding loan amount.