Government To Bail Out Sub-Prime Loans §
One part I don't agree with Obama on is some of the pending housing legislation in Congress.
Some Background
The Federal Housing Administration (FHA) lost $4.6 billion dollars last year. That's because the federal government guarantees home loans for low-income families, and low-income families are more likely to be delinquent on their loans.
In fact, while delinquency rates amongst all mortgages from 2002 hovered around 5% or under until rising to an estimated 6.4 percent for this year, delinquencies on FHA loans hovers around 12%.
Okay, I can understand the need to help low-income families. After all, the majority of them are NOT delinquent and home ownership and community stability are good social policies. But why raise the limit on an FHA loan to almost $750,000 when the average house in the U.S. is $220,000?!?
Even here in Irvine, California, a very nice home can be had for $750,000 and requires a minimum household income of over $150,000 a year. That's certainly not low-income. Melanie and I make nowhere near that stupendous an amount and no one would consider us low-income.
And Now...
And now Congress wants the FHA to back even more loans and make it even easier for those with bad credit to buy? Do you know the lenders themselves have admitted that they will hand off their worst (most likely to default) loans to the government to guarantee? This means we, the American taxpayer, will be paying for the stupid mistakes of greedy lenders and mortgage brokers and buyers who signed up for no-income loans with adjustable rate mortgages that they knew would reset to a higher rate.
It's bad enough already that we, the American savers, are enduring a falling dollar and rising commodity prices in oil and gas and food as a consequence of the Fed lowering interest rates to shore up investment banks and keep adjustable rate mortgages from resetting even higher. (I'm not including their attempt to forestall recession, as it only delays the inevitable truth of a business cycle.)