Monday, October 19, 2009

We have learned . . . nothing.

From the Washington Times:

Loans insured by the Federal Housing Administration (FHA) have become "the new subprime," and these loans are exposing taxpayers to the same kinds of soaring default rates and losses that brought down Fannie Mae and Freddie Mac as well as destroyed many banks and the private market for mortgage loans.

While private lenders learned a lesson from the mortgage crisis and are shying away from easy-money loans, the FHA has stepped into the breach. The agency has provided backing for 37 percent of all mortgages used to buy homes this year.

After the collapse of much of the private mortgage market last year, Congress and the George W. Bush administration greatly expanded the FHA's original Depression-era program aimed at assisting sales of modestly priced homes by more than doubling the ceiling on loans that the agency can insure to $625,500 while maintaining its loose lending terms - ensuring that nearly any home sale could be covered by the agency.

The FHA's predominance was enhanced further this year when Congress lifted the ceiling to more than $729,000 for major urban areas and passed an $8,000 tax credit for first-time homebuyers that can be accelerated for borrowers to use as a down payment on FHA loans and avoid any cash commitment to their home purchases.

While these changes were intended to be temporary and expire by the end of the year, given the fragility of the housing and mortgage markets, Congress is considered likely to extend them this fall.

Was this what Karl Marx meant when he said that when said about history: "the second time [is] farce"?

The FHA's backers in Congress, led by House Financial Services Committee Chairman Barney Frank, Massachusetts Democrat, maintain that high default rates are the price of Congress' decision to use the FHA to prevent a complete collapse of the housing and mortgage markets in a time of extreme distress.

The "distress" to which Mr. Frank refers is merely the fall of housing prices to a level that can be sustained by the wage level. By trying to prevent that, Frank and his allies are merely shoveling taxpayer money (mixed metaphor alert) into the maw of the bubble.

Via Mangan, a vignette about what this abortion looks like:

Denise Tejada bought a house last month at the age of 20, thanks in large part to a loan guaranteed by the Federal Housing Authority.

Her house cost $155,000. Tejada's loan was apparently made on a micro-down payment of just 3.5%, the minimum down payment to qualify for an FHA loan. On top of this, however, she got an additional government backed loan to make improvements. Her total loans amount to $183,0000. In short, she was immediately underwater on her new house.

The monthly payments on her debt amount to $1328. Her income is $2470, leaving her with just $285 a week to live on. She's paying 54% of her income to make the mortgage payments. She earns that income by holding down one full time and two part time jobs.

Write your Congresscritters: shut down the FHA and padlock the doors.

1 comment:

njartist said...

No, it is not farce: the Fascists/Marxists have an effective tool; it is only farce when viewed by those who refuse to see.