It seems hard to believe, but your government is purposely recreating the mortgage debacle of 2007 and putting you on the hook for the billions in losses coming down the road. In their frantic effort to generate the appearance of economic recovery they are willing to gamble with taxpayer’s money while luring unsuspecting blue collar folks into buying houses they can’t afford. During the previous housing bubble, greedy Wall Street bankers, deceitful mortgage brokers, and corrupt rating agencies colluded to commit the greatest control fraud in the history of mankind. This time it is your government, aided and abetted by the Federal Reserve, that is actively promoting the lending of money to people incapable of paying it back. And again, you the taxpayer will be on the hook when it predictably blows up.
The FHA, created during the first Great Depression, is supposed to be self-sustaining through mortgage insurance premiums charged to homeowners, just like Fannie, Freddie, Medicare, Social
The Big Short: Inside ...
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Security, and student loan lending were supposed to be self- sustaining through taxes, fees, and interest. This agency was supposed to promote homeownership for lower income Americans, but has been used by politicians as a tool to capture votes, payoff crony capitalist benefactors, and as a Keynesian stimulus tool designed to kindle a fake housing recovery. They entered the fray at the tail end of the last Fed/Wall Street created housing bubble, insuring a huge number of subprime mortgage loans from 2007 through 2009. The taxpayer has already had to bail out this incompetent, politically motivated, joke of an agency to the tune of $1.7 billion in 2014.
Edward J. Pinto, a former Fannie Mae official, estimates that under standard accounting practices the agency is already insolvent to the tune of $25 billion. Mark to fantasy accounting hasn’t just
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benefitted the criminal Wall Street cabal, but also the bloated pig government housing agencies – Fannie, Freddie and the FHA. The FHA’s share of new loans with mortgage insurance stood at 16.4% in 2005 and currently stands at 44.3%. This is a ridiculously high level considering the percentage of first time home buyers is near all-time lows and low income buyers have lower real median household income than they had in 2005. Distinguished congresswoman Maxine Waters, who once declared: “We do not have a crisis at Freddie Mac, and particularly Fannie Mae, under the outstanding leadership of Frank Raines.”, prior to them imploding and costing taxpayers $187 billion in losses, thinks the FHA is doing a bang up job. Her financial acumen is unquestioned, so you can expect another bailout in the near future.
“Above all, we must strive to have a healthy, viable FHA that can continue to facilitate homeownership for first-time and low-income home buyers, while standing ready in the unfortunate
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event of another housing downturn.”
How could politically motivated government apparatchiks insuring subprime mortgages with down payments of 3.5%, using weak underwriting standards, easing restrictions on borrowers with past foreclosures, in a housing market poised to drop by 20% when this next Fed/Wall Street housing bubble pops possibly go wrong? The entire faux housing recovery, which has driven average home prices up 30% since 2012, has been driven on the high end by The Wall Street hedge fund buy foreclosures in bulk and rent scheme, along with hot money cash from Chinese and Russian
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oligarchs, while the low end is being propped up by Fannie, Freddie, and the FHA with their brilliant idea to insure 3.5% down payment mortgages to future foreclosure aspirants.
We have the employment to population ratio at 35 year lows. We have had stagnant real wage growth since 2008 as low paying service Obama jobs have replaced higher paying production jobs. We have real median household income at 1989 levels and still 9% below the 2008 peak. We have mortgage applications 56% below the 2005 peak and hovering at 1996 levels. We still have 4 million homeowners underwater in their mortgages. We have housing starts languishing 40% below the long-term average. We have the home ownership rate of 63.8% at quarter of a century lows. We have mortgage rates at all-time lows. And we have home prices soaring far above the inflation rate and wages because the Federal Reserve, in collaboration with the Federal government decided to create another housing bubble (along with stock and bond bubbles) to rectify the disastrous consequences of their last housing bubble.
This is the absolute perfect point in time when the FHA thinks it is necessary for them to lure low income, low IQ, credit challenged dupes into the housing market. Risky mortgages are increasingly being underwritten by thinly capitalized non-banks and guaranteed by the FHA. In 2012 the large Wall Street banks represented 65.4% of FHA-backed loans. That number is now 29.6%, as even the risk seeking Wall Street criminal banks have come to their senses and realize loaning money to people that won’t be able to repay them will end badly – AGAIN. In their place, dodgy mortgage brokers (non-banks) now represent 62.2% of the FHA lending. Of course, once these low life mortgage brokers make the loans, Wall Street will package them, get a AAA rating from their bitches at S&P or Moodys, and then peddle them to yield seeking pension plans and life insurance companies. Sound familiar?
