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Brooklyn's Magic Mortgage Fix in Trouble

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It's no secret that FHA-backed mortgages, which protect lenders from losses and allow buyers to make down payments as low as 3.5%, are the new sleeping out for LIC condos. Developers have been rushing to get their new creations FHA-insured in this era of strict lending guidelines, and in development hotbeds like Williamsburg, being in cahoots with the Federal Housing Administration is pretty much expected. But surprise, this lifeline during the downturn is in trouble. The Brooklyn Eagle relays some scary stats. Since 2006 there's been a 325% spike in New York-area home loan guarantees, with one-third of the city's government-insured loans being funneled into Brooklyn. Action is at an unprecedented high, but ruh-roh, at the end of August the FHA reported that Brooklyn borrowers have defaulted on 11.34% of its guaranteed mortgages?twice as high as non-FHA loans. Brooklyn's not the only problem child to blame, of course, but the FHA's cash reserve is down 40% from last year, sanctions against lenders are flying and a testy congressional bailout may be looming. So what's the next fix?
· FHA-Backed Mortgages In Trouble in Brooklyn [BK Eagle]