We have learned . . . nothing!

Via Dissecting Leftism, a WSJ article about how the Federal Housing Administration is taking over the GSE's role in pushing worthless mortgages:

Last year banks issued $180 billion of new mortgages insured by the FHA, which means they carry a 100% taxpayer guarantee. Many of these have the same characteristics as subprime loans: low downpayment requirements, high-risk borrowers, and in many cases shady mortgage originators. FHA now insures nearly one of every three new mortgages, up from 2% in 2006.

. . . .

[B]eginning in 2007, the Bush FHA, Congress, the homebuilders and Realtors teamed up to expand the agency's role.

The bill that passed last summer more than doubled the maximum loan amount that FHA can insure -- to $719,000 from $362,500 in high-priced markets. Congress evidently believes that a moderate-income buyer can afford a $700,000 house. This increase in the loan amount was supposed to boost the housing market as subprime crashed and demand for homes plummeted. But FHA's expansion has hardly arrested the housing market decline. The higher FHA loan ceiling was also supposed to be temporary, but this year Congress made it permanent.

Even more foolish has been the campaign to lower FHA downpayment requirements. When FHA opened in the 1930s, the downpayment minimum was 20%; it fell to 10% in the 1960s, and then 3% in 1978. Last year the Senate wisely insisted on raising the downpayment to 3.5%, but that is still far too low to reduce delinquencies in a falling market.

Because FHA also allows borrowers to finance closing costs and other fees as part of the mortgage, the purchaser's equity can be very close to zero. With even a small drop in prices, many homeowners soon have mortgages larger than their home's value -- which is one reason FHA's defaults are rising.

My guess is that, with 100% guarantees, this new collection of bad loans will not cause credit markets to freeze and balance sheets to crater. But it is yet another way in which government is shoveling the (future) taxpayer's money into the black hole of the housing market with little in the way of oversight, let alone actual appropriation.

Although . . . in the context of Obama's budgets, even if the whole $180B per year defaults, it doesn't look like as much as it did a year ago.

But it hurts to see us making the exact same mistakes that lead to the housing bubble in the first place. What a terrible thing our government has become, growing in power in greed in direct proption to its invincible ignorance.