FHA isn't expected to need refinancing assistance

Barclays Capital recently predicted that the Federal Housing Administration will most likely not follow the example of Fannie Mae and Freddie Mac in loosening its refinancing rules to help borrowers lower their monthly payments. Rather, the financial institution expects the FHA to stay firm on forcing homeowners with older mortgages to pay higher insurance premiums in refinancings.

According to Bloomberg, the FHA backs about one-third of new U.S. mortgages, and it increased annual premiums for customers in an effort to avoid a taxpayer bailout. Homeowners with FHA loans typically do not suffer from a lack of credit availability as they are able to refinance without home appraisals or new underwriting. Barclays believes the FHA's decision not to lower its refinancing standards to help keep home loan rates low will enable the agency to avoid a bailout.

Forbes, however, reported that the FHA could still require a taxpayer bailout, after the agency reported an economic net worth of $2.6 billion backing $1.07 trillion insurance currently, with a capital ratio of 0.24 percent. In 2010, the agency's capital ratio was 0.5 percent, and 6.4 percent in 2007.

In its annual report to Congress, the FHA said it has a 50 percent chance of having a net worth of less than zero in the near future if it exceeds current capital resources if home prices drop even lower during the 2012 fiscal year. For the FHA to avoid a bailout, home prices will have to grow or stabilize for the next 12 months, the source reported.

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