Sunday, June 22, 2008

The FHA Time Bomb

The main editorial in this weekend's WSJ is entitled The FHA Time Bomb. (One of my favorite articles in the WSJ is that editorial; I agree with it much more often than I disagree.)

The Federal Housing Authority, whom Congress is trying to give huge sums of money to help get us out of the sub-prime mortgage crisis, is the same organization that just announced a $4.6 billion loss. The main culprits are poor management and the "downpayment assistance program."

When government fails -- it just about always does -- its way out is to ask for more money. More money to do more of the same things or to try some new whacked-out programs that will certainly fail.

Pending Congressional plans intend to put taxpayers on the hook for tens of billions of dollars of additional mortgages losses.

Zero or very low downpayments are one of the main reasons the country is in the housing mess it is. Borrowers have no skin in the investment. They can walk away from the house as if it were nothing more than a rental.

It may be the American dream to own a house. However, it is not Congress' or taxpayers' responsibilities to make this dream a reality.

The realization of the American dream is based on hard work and prudent decisions.

Everything about our current mortgage crisis is based on quick fixes and poor decisions. Congress is about to make another costly housing blunder.

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