Thursday, April 2, 2009

FHA loans failing, shocker

In a surprise to single-celled organisms everywhere (and nobody else), the government admitted that the FHA loans it gave out (with your money) are starting to fail in alarming numbers. Well, actually, that's not entirely accurate: they have been failing for while now, everybody knew they were going to fail, and someone just had a slow enough news day to write an article stating the obvious. Uh, I mean, wait, who could have known that these 3% down loans (where we let the seller pay the 3% directly or indirectly through a sham "charity") we gave out to people who couldn't substantiate income or savings necessary to actually afford the actual house would fail? Wait, what, everyone? Oh, right, cause it's fricken obvious. Maybe the first clue you were giving out below-market loans for above market purchases might have come when your market share went from like 2% to like 50%, and you went to Congress to steal another few hundred Billion from the taxpayers... but I digress...

No, what I really wanted to comment on was my suggestion for how to prevent this sort of criminal theft disguised as abject failure in the future. See, the crux of the problem is that while everyone, their mothers, their living pets, and their pet rocks could tell that these were idiotic loans to make, the FHA still went to Congress to take more money, still kept "lending" it out, still kept their ultra-low down-payment requirements, and kept right on funneling money from the taxpayers to the sellers (primarily banks) like it was no big thing; neigh, like it was the righteous thing to do! I mean, it takes a certain amount of gall and/or stupid to claim that (for example) imposing a new crippling tax on all energy consumption will help the economy recover (like Obama's claim about his carbon tax scam), but it's a whole new level of gall/stupid to call your theft the "right" thing to do.

Anyway, here's what the government should do (in an ideal world, of course, where we had a government "for the people"): make everyone in the FHA organization, from the counter-level clerks up through the Congress-scum who give them more money to flush, personally and jointly liable for all losses the FHA loans incur above the national average percentage for prime loans. After all, these are carefully controlled, well documented, sound loans with comprehensive oversight, right? If you really want to give them more money, there should be personal fortunes on the line; and if you don't believe that the money is safe, you shouldn't be involved in the process.

It would be a win/win/win, really. The taxpayers could recover a portion of their losses if the loans go south, from the very people who caused those losses in the first place. Plus, the should-be criminals who were stealing taxpayer money to hand out to deadbeats and scam artists would find themselves broke, and likely out of a job. Finally, we could take a $300+ Billion chunk out of the enormous waste of taxpayer money the government has been dropping on our heads recently; it's not much, but every little bit helps. Oh, and I forgot: it would also make housing more affordable to lower-income people by reducing inflated purchases and valuations, which accidentally fulfills the stated goal of the HUD and FHA in the first place, which kinda got lost in their crazed crusade to bankrupt the country by blowing bubbles. Funny how things work out.


  1. I realize now that some people perceive the United States to be one giant bank, where you can take out loans but never repay them. A bank couldn't survive that, so why in the world does our government insist on doing it?

  2. Well, to be fair, our government won't run out of money like a normal banks would; it's more equivalent to a bank giving out loans in bank stock, which people can then sell on the open market for other goods and services. Sure, you can create more stock forever and nobody needs to pay it back, but eventually other people stop giving you stuff in exchange for your stock, cause your reckless creation and spewing have caused it to become worthless.

    The problem, though, is when this happens to a country, it's called a monetary collapse, usually followed by a government collapse, and we the people probably didn't want our supposed representative leaders throwing away our prosperity like bank robbers dumping money out of their car to cover their getaway. If only America was a country with a government acting for the people...

  3. Instead of reforming the organization that indirectly provides most home loans, it would be nice if we could just eliminate it. Then we wouldn’t have a struggle to keep it from getting out of hand like it did recently. In its place, the government could simply give small amounts of money to needy families in form of paying for part of the down payment, closing costs, or points to buy down the interest rate. Some of the money would go to waste since a segment of the poor is poor because they don’t manage money well, but at least the money would be wasted on needy people instead of on people in $300,000 houses and it wouldn’t drive wild swings in the housing market.

  4. I would also be in favor of eliminating the FHA, although I would guess that my personal liability plan would accomplish much the same end. I disagree with the subsidies idea, though... home ownership is not a fundamental right which we should be spending the people's collective money on, in any form. I would be in support of funding financial education programs, homeless support, and job training, and possibly even government-sponsored minimum-wage employment if jobs are scarce, but I can't get behind handouts to help people "buy" things they cannot afford: the government simply should not be doing that, in my opinion.