FHA Loans: The Federal Housing Administration and Its Challenges

``According to the FHA Commissioner, David Stevens, the modifications should increase capital reserves by at least $3.5 billion annually. It expects to surpass the 2 percent requirement by 2015. The caveat, however, is that the mortgage market not get much worse. The FHA assumes that home values will not decline more than 3 percent. If home values decrease by 12.5 percent during the next two years, then the FHA will incur negative capital reserves through late 2011. Moreover, if home values fall 19 percent, then the FHA must seek additional government funding.''