Wednesday, April 09, 2008

Ain't no reason to wonder why our economy is going bye-bye

posted by Bill Arnett @ 2:08 PM Permalink

Also from the NYT this morning comes news of another impending economic implosion supervised, of course, by the very crackpots financial experts that got us to where we are today.

The Bush administration on Wednesday proposed a new effort to help homeowners in danger of foreclosure by loosening the eligibility criteria for new mortgages insured by the federal government. The program seemed designed, at least in part, to pre-empt legislation sought by Congressional Democrats for a much broader expansion of federally insured loans.[…]

In his testimony, Mr. Montgomery said the housing agency would relax its underwriting rules to allow borrowers who have had up to two late mortgage payments within the last year qualify for a new federally insured loan, at the traditional maximum of 97 percent of the home’s current value. Mr. Montgomery said that applicants with three months of delinquency on their current mortgage would potentially qualify for a loan of up to 90 percent of their home’s value.

Borrowers with F.H.A.-backed loans must also pay insurance premiums to protect the government and taxpayers in the event of defaults. Mr. Montgomery said that the administration plans to change its insurance fees, now charged at a flat rate, to allow more flexible pricing and more expensive premiums for borrowers whose credit scores and other financial history identifies them as a greater risk.
It's quite obvious the distressed homeowner who goes to FHA will be saddled with mandatory government insurance on a sliding scale that again favors the rich and well-off borrowers. It is the people who need help the most who will be subsidizing the wealthy with their higher cost of insurance premiums. Premiums that will be rock-bottom low for the rich, and highest, again, for those needing the most help.

It is equally certain that, "loosening he eligibility criteria for new mortgages insured by the federal government" is a duplication of the same thing lenders did to get us into this economic morass.

Why would we want the government to enact a program that will likely have the government creating yet another subprime loan risk?

This is the most incompetent administration in American history. They will find a way to screw this up, too.

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