The FHA Is the New Subprime [Kevin D. Williamson]
An interesting piece in the New York Times today:
The Federal Housing Administration said Thursday that its cash reserves had dwindled significantly in the last year as housing prices slumped and many of its borrowers defaulted on their mortgages.
Still, government housing officials stressed that the agency, which insures loans made by private lenders, would not need a direct bailout.
“Even if we were to go below zero, if the reserves were to become negative, there is no extraordinary action that Congress or anyone else needs to take,” the secretary of Housing and Urban Development, Shaun Donovan, said at a Washington press conference.
Setting aside the metaphysical question of whether a "reserve" with a negative number in front of it still is a reserve, the most interesting words here are "direct bailout." That leaves the door wide open for all sorts of other action.
Who could have seen this coming? Oh, yeah — I did, in May:
But really, who’s backing million-dollar mortgages any more? Oddly enough, the FHA – meaning taxpayers — is getting close. W. C. Varones, a San Diego–based investment manager who blogs at agoravox.com, reports that generous FHA down-payment terms mean that an investor could pick up a $700,000 house, finance $697,000 through the FHA for 5 percent on a 30-year mortgage, and only pay a 1.75 percent FHA fee in exchange. Paying 3.5 percent down under FHA terms, rather than 20 percent down through a conventional bank mortgage, “translates into a $12,000 fee and $300/month in exchange for keeping your extra $115,000 in cash,” he writes. “Plus, you can roll the fee and the points into the loan, so it’s not cash out of pocket.” His conclusion: “FHA is the new subprime. … And the sucker is not a sleazy outfit like Countrywide. It’s the FHA. That means you, the taxpayer.”
http://media.nationalreview.com/post/?q=ZjRmMmZhZDcxYTdiMTMyYzBiODA4YWY5MjAzNDIxNDU=
Columbus Townhall > Forum > Politics > National > Economy, Budget and Fiscal Issues (Moderators: Peter, CTH Public Relations)
Topic: Federal Housing Administration
