From BusinessWeek:
"A Bush administration official on Monday warned against overly broad government intervention to stem the housing crisis, arguing that lawmakers' proposed foreclosure prevention program would saddle taxpayers with too much risk.From the NYT:
The Federal Housing Administration, which guarantees loans made to borrowers with poor credit, could be weakened by a plan for the agency to back as much as $300 billion in new loans to help borrowers refinance into cheaper, fixed-rate mortgages, said commissioner Brian Montgomery.
'We are not designed to become the federal lender of last resort, a mega-agency to subsidize bad loans,' Montgomery said in a speech at the National Press Club".
"WASHINGTON — The Federal Housing Administration expects to lose $4.6 billion because of unexpectedly high default rates on home loans, officials said Monday.
. . .
The projected loss is the highest in the home loan program since 2004, and officials said the F.H.A. had to withdraw $4.6 billion from its $21 billion capital reserve fund in May to cover the costs. They said the agency, which is self-sustaining, would not need appropriations from Congress to remain solvent.
But Mr. Montgomery warned that the F.H.A. would have to renew its efforts to end the seller-financed down payment program, which accounted for 35 percent of its loans in 2007.
He said the mortgages had foreclosure rates three times those of traditional loans and would push the F.H.A. to the brink of insolvency".
3 comments:
300 billion. nice. they should start putting these numbers in 'household' figures.
so my household is contributing $2400 for this, sweet. and my household pays way more taxes than an average homeowners household, so i'm probably paying more like 4800.
great country
gt said:
"so my household is contributing $2400 for this, sweet."
Yeah, that's pretty bad. Add to that what we pay for sending kids to schools (1/3 of the DC budget, for example) which many of us are not direct beneficiaries of, and you have a lot of money going to help others ... which we hear is ultimately supposed to help us all ... But you gotta wonder ...
Personally, I think the help should be a little more direct and in the way of incentives for everyone. For example, increase the tax benefit of owning for all homeowners, and don't just "help" those who got themselves into trouble. Make books and teaching tools available for all people looking to educate themselves or their kids including the homeschoolers. I.e., Don't earmark it for specific groups (e.g. public school students or defaulting mortagagees), make it more broadly available and reward those who are already personally responsible as well as those who aren't yet ... but with the little bit of extra help might be. In brief, create incentives and don't do bail outs. They're not the same ... and they don't bring out the same responses. Incentives help incentivize doing the right thing, while bailouts help re-enforce bad behavior since "it's okay not to be personally responsible, since the others will be there to bail me out or pay for my decisions."
lance said:
"Personally, I think the help should be a little more direct and in the way of incentives for everyone. For example, increase the tax benefit of owning for all homeowners, and don't just "help" those who got themselves into trouble."
Personally, I'm not sure there should be any help at all other than not taxing debt forgiveness. Housing tax breaks are partly to blame for the housing bubble in the first place. Housing is subsidized in the United States no matter if you live in Section 8 housing or if you own a mansion in Great Falls. Further tax breaks, or subsidies, have no business in an industry that never should have been subsidized in the first place.
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