THE WALL STREET JOURNAL|OPINION JOURNAL
May 5, 2009
Excerpts from the article (Take a deep breath now..):
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.
The financial results so far are not as dire as those created by the subprime frenzy of 2004-2007, but taxpayer losses are mounting on its $562 billion portfolio. According to Mortgage Bankers Association data, more than one in eight FHA loans is now delinquent -- nearly triple the rate on conventional, nonsubprime loan portfolios. Another 7.5% of recent FHA loans are in "serious delinquency," which means at least three months overdue.
And it continues...
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.
Do I have to say it? Ok, I guess I do... "WHY DO THEY DO THIS?"
Do I have to answer that? Ok, I guess I do... "Powerful housing lobby -- Realtors, homebuilders and mortgage bankers, backed by their friends in Congress"
Do I have an answer? "YES! TERM LIMITS!!!!!"
Why do we have to have term limits? "Because the average U.S. voter is too ignorant (intentionally or not) of what happens in Washington D.C. and they vote on name recognition (i.e., celebrity) and that is why we get stuck with people like Robert "KKK" Byrd (in the senate 60 YEARS!) and David "Obey-me" Obey (in the house since 1969!) Shut off the "career mentality" and get their butts back to the private sector (and a REAL job) and let some fresh blood into the congress!"
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