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DAMNIT, STOP THE LOOTING NOW!
Put the kids away before reading.
If this does not make your blood boil…..
Herein lies the problem. The FHA’s standard insurance program today is notoriously lax. It backs low downpayment loans, to buyers who often have below-average to poor credit ratings, and with almost no oversight to protect against fraud. Sound familiar? This is called subprime lending—the same financial roulette that busted Fannie, Freddie and large mortgage houses like Countrywide Financial.
The article goes on to note that as of the end of this year FHA and Ginnie will have issued and hold one trillion dollars of mortgages, that the current default rate is now 7%, and the delinquent rate is running some 13%.
Because the same crooks, swindlers and thieves that infested the housing market in 2003, 2004, 2005, 2006 and 2007 in “subprime” and “ALT-A” have now moved into the FHA product.
There is only ONE way to guarantee safety and soundness in mortgage lending. ONE!
That is to require twenty percent down payments, limit the back end ratio, or debt-to-income, to no more than 36%, and fully-underwrite EVERY SINGLE FILE, with CRIMINAL penalties ruthlessly enforced for ANY fraudulent misrepresentation BY ANYONE.
The FHA is now running with leverage equal to that of Bear Stearns and Lehman Brothers. You know, those two “banks” that were underwriting loans without sufficient down payments and on dodgy debt-to-income ratios AND BLEW UP?
We’re even doing 125% loan-to-value on FHA NOW!
In some cases, these owners are so overdue in their payments, and housing prices have fallen so dramatically, that the borrowers have a negative 25% equity in the home and they are still eligible for an FHA refi.
Make sure to read the rest, it’ll give ya shivers…
Here is the story that Karl is writing about:
Ginnie Mae and FHA are becoming $1 trillion subprime guarantors.
Much to their dismay, Americans learned last year that they “owned” Fannie Mae and Freddie Mac. Well, meet their cousin, Ginnie Mae or the Government National Mortgage Association, which will soon join them as a trillion-dollar packager of subprime mortgages. Taxpayers own Ginnie too.
Only last week, Ginnie announced that it issued a monthly record of $43 billion in mortgage-backed securities in June. Ginnie Mae President Joseph Murin sounded almost giddy as he cheered this “phenomenal growth.” Ginnie Mae’s mortgage exposure is expected to top $1 trillion by the end of next year—or far more than double the dollar amount of 2007. (See the nearby table.) Earlier this summer, Reuters quoted Anthony Medici of the Housing Department’s Inspector General’s office as saying, “Who would have predicted that Ginnie Mae and Fannie Mae would have swapped positions” in loan volume?
Ginnie’s mission is to bundle, guarantee and then sell mortgages insured by the Federal Housing Administration, which is Uncle Sam’s home mortgage shop. Ginnie’s growth is a by-product of the FHA’s spectacular growth. The FHA now insures $560 billion of mortgages—quadruple the amount in 2006. Among the FHA, Ginnie, Fannie and Freddie, nearly nine of every 10 new mortgages in America now carry a federal taxpayer guarantee.
“FHA Running Leverage Equal To Bear Stearns and Lehman Brothers”: If you have not put Market Ticker .. http://bit.ly/qRF7I
“FHA Running Leverage Equal To Bear Stearns and Lehman Brothers” http://bit.ly/1z2BI #logisticsmonster #tcot
The reason the government allow this is not property ownership… the reason is to have more people paying property taxes to support the State’s coffers. That is everyone’s purpose in life to the Statist.
Barney Frank said as much.
Never mind these people can’t make the payments on the mortgage… but, the government will come get their tax money first… you can better believe that!
Way, way off topic, but the video of Clinton imploding in the Congo is up… Things are melting down all around….
The Complicated Diplomatic Life of Hillary Clinton (UPDATE 1X: Clinton on the Defensive in Congo over Bill’s “Presence”; UPDATE 2X: Bill Off the Leash?; UPDATE 3X: Video of Clinton Outburst, Glenn Beck Comments)
I saw that coming a mile a way. Does anyone remember going to the state fair as a kid and getting one of those balloons that had another balloon inside; those were cool. That is what we have here with the lax FHA standards. On top of it all Uncle Sam is passing out $8000 tax credits only to first time homebuyer; the most gullible and likely to default demographic. This is flat crazy! The only way a free market can function in health is without government interference. The way they have been trying to control the market is like a doctor treating an otherwise perfectly healthy patient with a head cold with stimulants and when he get too high they give him a depressant, all while administering broad spectrum anti-biotic and steroids. Leave the guy alone…let him heal up…give Atlas a break!
I was involved in the real estate industry in a previous life, and I can tell you for fact that FHA standards were once set to a standard that would protect their taxpayer backers very well. FHA was designed as a way for lower income people to buy an affordable house that they had to stay in for at least 2 years in order to qualify. And that word is key: they had to qualify. it didn’t matter what their race or religion or sexual orientation was – they needed to earn enough money (and have a stable history at the job) to be able to pay for the mortgage!
This whole fiasco was caused deliberately by the unmitigated greed of thousands on Wall Street and in the cesspool that is Washington, D.C. TPTB have allowed it to go on because an added benefit is that it destroys the American homeowner and devalues their property even if they didn’t participate in a sub-prime or Alt A deal.
You don’t have to look too far for the next scam: Ginnie Mae, FHA, Cash for Clunkers – they’re all more of the freaking same, and we’re coughing up the trillions to finance our own downfall. Somewhere Stalin is looking at all this and saying, “Damn! Why didn’t I think of this?”