Unconstitutional (no Constitutional authority for the FHA or the federal government to be a guarantor of home loans) federal government intervention in the market...ostensibly to prevent a necessary market correction of conditions created since the credit bubble created by the Fed from and after the beginning of 2001 when the Fed intervened to “stop” the market correction tech bust.
Virtually all of the federal government today (both Democrats and Republicans) are modern-day descendants of FDR-type socialism and the naive and arrogant opinion that the government can outsmart the market...watch how both parties continue to push the Fed to pump money in the market to prevent a stock slide and inevitable recession and watch how both parties will create new federal programs and spend billions to “help” homeowners keep homes they could never afford
The markets will ultimately prevail...and government intervention and government (i.e. taxpayer) bailouts and government manipulation of the money supply...will all only delay the inevitable ugliness...and only make it worse when it eventually happens
The government is not guaranteeing these loans with government funds. FHA is basically a nonprofit mortgage insurance company. Lenders and borrowers pay premiums for the loans to be insured against default. The FHA insurance fund has never run a deficit and in fact usually runs a surplus that helps HUD meet its budget. It does not insure crazy loans like 2/28 ARMs and does not allow lending on stated income. The FHA is conservative about paying claims and is a vigorous regulator of its approved lenders. Lenders that submit fraudulent claims or failed to follow FHA guidelines when originating the loians can have their claims denied and can be disbarred from the program. It’s actuially a pretty good model for how the mortgage business ought to run going forward.
You got it, ux! Government intervention in this mess will only serve to make the whole thing messier!
Besides, the government is trillions of dollars in debt. What does it know about finance anyway? Answer: Not much.