FHA: Ready for the Mother Of All Bailouts?
posted at 2:00 pm on September 5, 2009 by The Other McCain
The FHA is on the hook for lots of “underwater” loans, taken out by low-income homeowners who got special low down-payment deals and — in case you didn’t notice — unemployment hit a 26-year high in August, with no prospect the 9.7% jobless rate will go down any time this year. Dave Hogberg of Investors Business Daily reports:
FHA-insured loans have more than tripled from 530,000 in fiscal year 2007 to 1.7 million thus far in 2009. The Government National Mortgage Association, which securitizes FHA loans, has boosted its mortgage-related issuance to $287 billion from $85 billion. Yet during that same period, the FHA’s loan delinquency rate has climbed to 14.4% in Q2 from 12.6% two years earlier.
OK, so guess what the consequences are now?
As job losses continue to mount, why would someone facing economic difficulties try to keep a home that is worth less than the money owed on it?
One expert explained to the Wall Street Journal what this means:
“They’re probably going to need a bailout at some point because they’re making loans in a riskier environment,” says Edward Pinto, a mortgage-industry consultant and former chief credit officer at Fannie Mae. “I’ve never seen an entity successfully outrun a situation like this.”
Read all about it at NTCNews.com. The revolution will not be televised, but the apocalypse will be blogged.
This post was promoted from GreenRoom to HotAir.com.
To see the comments on the original post, look here.
Blowback
Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.
Trackbacks/Pings
Trackback URL
Comments
Comment pages: « Previous 1 2
Problem is the amount of the Treasury bonds held by the Soc Sec Administration…. its like 4.2 TRILLION.
China is a Piker compared to our own Ponzi Scheme…
Problem is, that the Ponzi scheme of Soc Sec is about to have to call in its debts to pay off the Baby Boomers as they retire…
And as when ALL Ponzi Schemes fail… when they can’t cover their promises… its the last in that will take the brunt of the damage, and lose the most.
Romeo13 on September 5, 2009 at 4:25 PM
I was on welfare briefly when my oldest was a baby. I then got a job waitressing when she was 2 and eventually got a full time job at a nursing home, and got off welfare. I guess you need to be personally motivated.
becki51758 on September 5, 2009 at 4:27 PM
I don’t buy that. We’ve had extremely low unemployment rates for a long time. There are always people between jobs, not really interested in working,but technically unemployed, etc. Economists argue over what full empl is, but it isn’t 100%. I think 3-5% unemployment is often discussed as “full employment.” Obviously, some economically prosperous places have less than that, and some more, but overall in US those numbers hold. People have to move to where jobs are if local conditions don’t provide for one. It’s unfortunate, but our enormous 48 state job mkt with no barriers to movement is one of the reasons our unemp. rate is traditionally lower than Europe’s has been, where barriers to movement have been high, and are still high due to language and cultural impediments.
JiangxiDad on September 5, 2009 at 4:28 PM
MB4,that may have been one of your best.Sadly,it is all too accurate.
Timely piece, Mr. McCain. Good job.
di butler on September 5, 2009 at 4:31 PM
Worse than that, I’m afraid. The SS trust fund holds “special issue” IOU’s, that have the full faith and credit of the US gov’t backing, but as far as I know they are some kind of “special” treasury bonds, and I’ve wondered exactly where in the pecking order the Treasury would have to repay them. When the US really runs out of money (not enough taxes received, and not enough people/countries willing to lend it money anymore, the US will have to pay its debts over time, piecemeal. I don’t think they’ll be rushing to pay SS recipients first.
JiangxiDad on September 5, 2009 at 4:34 PM
The whole point of the system is to shed jobs. Less jobs=less cost of goods sold. Prices lower for the population but if your income is zero, low prices don’t matter. Then it’s up to the free market to determine whether there’s enough demand for manpower for another industry. Or not.
The Calibur on September 5, 2009 at 4:35 PM
Soooo….do I start the 10 foot high, barbed-wire fence around my property or not?
Bishop on September 5, 2009 at 4:35 PM
Every day with Obama, we get closer to knowing the answer to that question. If the Reps dont take back the Congress in ’10 and hamstring Obama, build it. If he wins again in ’12, you’ll need it.
JiangxiDad on September 5, 2009 at 4:39 PM
The scary thing is, I was half serious.
If the poop hits the fan, the cities are going to dissolve into anarchy and all those people are going to need help which may or may not arrive. So they head out to the exurbs and the country in the belief that smiling farmers with fresh apple pie and smoked hams will be waiting for them.
Bishop on September 5, 2009 at 4:43 PM
So was I. More than half. I like pie.
JiangxiDad on September 5, 2009 at 4:44 PM
Barbed wire is too easy to cut… or flatten with a vehicle…
Now… going Medival? ie Stone walls? We could call it Bishop’s Wall (like Hadrians’s)… or maybe the Great Wall of Bishop?
Romeo13 on September 5, 2009 at 4:44 PM
It’s all part of the plan.
- The Cat
MirCat on September 5, 2009 at 4:47 PM
I’ve recently come to appreciate the Renaissance Italian style stone houses with no windows on the first two levels, and the spanish/mexican style with indoor courtyard and well. I thought it was just a matter of taste before, like liking a split level. The functionality escaped me.
JiangxiDad on September 5, 2009 at 4:48 PM
Do you happen to know any more?
JiangxiDad on September 5, 2009 at 4:49 PM
Land mines.
the_nile on September 5, 2009 at 4:49 PM
True enough, and if I want to have any semblance of security I would need a high-tech and expensive surveillance system. Maybe a mix of wire and concrete posts to stave off vehicle intrusions; I mean how many people would be carrying wire snips as they leave their inner-city apartments?
Bishop on September 5, 2009 at 4:52 PM
That’s the way it should be but you and I know that’s not the way it’s going to be. As was pointed out by Dr. Zero, The One is a textbook fascist, not a socialist and we all know about not letting a good crisis go to waste.
Yakko77 on September 5, 2009 at 4:54 PM
Razor wire might be more effective. Claymores are optional.
The Other McCain on September 5, 2009 at 4:57 PM
Now punji-stake pits, that I like.
Bishop on September 5, 2009 at 4:59 PM
the punji-stakes are easy to make, too. just coat a pointed stick with feces. cat, dog or even human would work, i guess.
this is all from my watching of jungle movies. actually, i have no idea if any of this is true.
kelley in virginia on September 5, 2009 at 5:02 PM
Americans have come to avoid any pain and suffering for many decades. We want what we want when we want it. Long gone are the days you saved up and paid cash for an appliance or a car. Now, you don’t even need a 10% or more down payment on a house. The government, corporations, and even the American people have lived above their means for years and probably many decades.
I blame the American voters first, but a close second is Congress. They have been more concerned with getting re-elected than doing what is right. I include both parties in this area. The thirst for power and control by “our” public servants has gone unregulated by the American public for too long. Our ignorance and apathy are going to going to reap the whirlwind.
We are probably headed for at least a double dip recession if not a depression that will make the Great Depression look like a walk in the park. The days of the US dollar being the universal currency around the world is going to soon end and increase the rate of decline in the country’s economy. IMO, the first sign will be using the Euro dollar or another currency for the purchase of oil.
Looking at the beliefs of various advisors around Obama, the possibility of racial conflicts breaking out in the inner cities seems to this observer to be coming sooner rather than later and allow Marshall Law to be used and other changes.
Like others on this blog, if the Republicians do not take over enough of Congress in 2010, then all our gooses are cooked.
ny59giants on September 5, 2009 at 5:04 PM
It’s already happening here. The crime rate in my area is up as some thugs figure out that robbing from the have-nots is not nearly as lucrative as robbing from the haves.
And even more scary, I am one very petite lady. I need barbed wire fence AND a stone wall to defend my stuff…and a well-armed husband (who’s dragging his feet on arming himself. Man! I have to get him on the ball…)
Grace_is_sufficient on September 5, 2009 at 5:15 PM
It might help if they stopped making loans to unqualified borrowers.
At least for a while.
Just a thought.
PattyJ on September 5, 2009 at 5:36 PM
And the hits just keep on coming.
Yakko77 on September 5, 2009 at 6:09 PM
Grace: Go to a sporting goods store and buy a pump-action shotgun and plenty of ammo. They’re relatively cheap and very effective. The sales people will be happy to help you out.
And hold your fire until the attacker is actually in your house, then make your shots count.
ZenDraken on September 5, 2009 at 6:17 PM
Reality. If they get this far north. Before the deep snows:
…smiling farmers with fresh
apple pieammo and smokedhamstargets will be waiting for them.Yoop on September 5, 2009 at 6:28 PM
I feel like a female Barney Fife with a gun, but I know my husband is a good shot and I have a pretty good right-hook if I had to use it.
yoda on September 5, 2009 at 6:36 PM
The end of fight club.
But seriously, this is just an extension of what Obama was doing with Acorn that caused the credit crash in the first place. It didn’t take out all of the banks so lets go one more’gin
- The Cat
MirCat on September 5, 2009 at 6:45 PM
They are not to be allowed to get that close!
Yoop on September 5, 2009 at 6:47 PM
Didn’t the Japanese have suicide mines that were essentially digging a hole in a road, placing a aerial bomb with a guy with a hammer in the hole and then have the “mine” operator strike the fuse mechanism when a tank drove overhead?
I’m not suggesting YOU use this tactic personally but if you can con a neighbor you don’t like into doing this for you then…..
If nothing else, train a monkey or something.
:D
Yakko77 on September 5, 2009 at 7:00 PM
In other news, the scariest video I’ve seen in a long time. I think I’m going to go drink excessively now.
A black hole called Federal Reserve
Why do I get the feeling it’s already too late?
Is ignorance bliss?
Are we better off pretending the dollar still has value for as long as we can so we can at least pretend to go on living normal lives?
Will a Revolution, a demand for real change, real openness and accountability truly save us or hasten our downfall because it is indeed too late?
Yakko77 on September 5, 2009 at 7:30 PM
I’ve got a great idea! Let’s let Barney Frank roll the dice ONE MORE TIME!
GarandFan on September 5, 2009 at 7:51 PM
If the DNC had a heart, they would just pay these loans off for the people who got “bamboozled” into signing about 200 specific disclosures before they could take out the loan… I’m just sayin’…
Khun Joe on September 5, 2009 at 7:53 PM
There’s a reason for the bailouts, for the supposed ineptness of FHA, Fannie, Freddie, for the takeover of banks, auto co., for the Attack on Insurance Companies via healthcare. It’s designed to destroy thos Insurance Companies, Energy is next through cap and tax and the takeover is complete. Don’t believe me. From one of the rats who jumped ship. believe Horowitz! Take 10 minutes to educate yourself if you haven’t seen this:
http://lucianne.com/article/?pageid=kitchen_czabinet
dhunter on September 5, 2009 at 8:11 PM
The latest bad news:
FEDS SHUT DOWN 5 BANKS
The Other McCain on September 5, 2009 at 9:28 PM
Also:
Va. Tech 10, Alabama 9
(5:34 2nd Quarter)
Horrible . . .
The Other McCain on September 5, 2009 at 9:30 PM
TOUCHDOWN TIDE!
Alabama 16, Va. Tech 10
Maybe there is hope, after all . . .
The Other McCain on September 5, 2009 at 9:35 PM
They are still Treasury notes. The money that came into SS was used to buy bonds, and the cash was spent on other programs. The only way to pay SS benefits in a year or so will be to raise taxes, or more likely, means-test social security, so that those who were responsible and saved money get punished, and those who spent every penny on big screen televisions, etc. get rewarded.
Vashta.Nerada on September 5, 2009 at 9:38 PM
1:02 before halftime, Va. Tech scores:
Va. Tech 17, Alabama 16
Armageddon nears . . .
The Other McCain on September 5, 2009 at 9:47 PM
For those of us who have lived responsibly and contributed max amounts to 401K’s IRA’s etc. since working age of 22 and have managed to survive the engineered market dive it will be a double whammy!
Higher taxes AND means testing.
It is absolutely criminal what these a$$E$$ have done. They made the rules, we abidded by them and our wealth will be confiscated to pay for their theft and payoffs to the irresponsible who saved nothing for retirement.
Maybe we should do as Rangel does , invest in property overseas and domestic depleting savings and then don’t report the income or even checking amouts in Rangels case $500,000.
When they come for us say I’ll accept the same punishment Charlie Rangel recieved.
dhunter on September 5, 2009 at 9:53 PM
Late to the party as usual. They just will quit paying and there is no recourse to the courts. As I have been posting periodically SCOTUS ruled in the early 60′s that no one is entitled to a SS check. I notice Walter Williams in a Town Hall posting said SCOTUS has ruled twice that no one is entitled to a SS check. So the baby boomers, of whom I am one, are SOL.
chemman on September 5, 2009 at 9:54 PM
What I just do not understand is why there are people out here in California advertising 125% refinancing with no paperwork.
This is bad no matter what side of the fence you are on.
Freddy on September 5, 2009 at 10:01 PM
“Reports filed by banks with the Federal Deposit Insurance Corporation indicate that at the end of June about one-sixth of all construction loans were in trouble. With more than half a trillion dollars in such loans outstanding, that represents a source of major losses for banks.”
– New York Times
“The nation’s jobless rate jumped to a 26-year high of 9.7 percent in August from 9.4 percent in July. It’s expected to top 10 percent this year and keep climbing into part of next year . . . And it could take four years or more for the unemployment rate to fall back down to a normal level . . .”
– Associated Press
“[I]n the event of a true banking meltdown, the FDIC wouldn’t have near the amount of necessary funds to ensure depositors got their money back. According to the FDIC’s own website, they manage an ‘insurance fund’ of more than ‘$52.8 billion,’ yet the agency ‘insures more than $4.3 trillion of deposits in 8,494 U.S. banks and thrifts.’ . . . Yes, the FDIC carries enough cash to cover a whopping 1.23% of the total deposits that it claims to insure . . .”
– David Kreitzman, Motley Fool
The Other McCain on September 5, 2009 at 11:47 PM
In 9 brief months Obama has severely damaged the American economy. Smart power at its finest.
Had he simply cut taxes and NOT had a bailout of his favor seekers we would have joined Germany and France with a growing economy this quarter. Other countries are growing their economies. We’re not growing solely because of Obama. The statute of limitations ran out on blaming Bush this last summer.
Mojave Mark on September 5, 2009 at 11:59 PM
I can imagine the loans they were giving and to who they were giving them too. I make a very good salary in NYC but, nowhere to the amount the FHA wanted to give me to buy my first home. I was approved for a healthy sum but, had no intention to use all of it for my first home(maybe I had some common sense) but, the FHA since I was a first time buyer would give me 900K for a home which by no means was in my salary category to afford if I were to use that tho buy a home. But, as I said I used common sense most people don’t and over buy what they can actually afford and become house poor. Now as I am right now and many others are looking for a job because they were laid off. This is why we need to have these loans regulated and ONLY give the amount of money one can afford from their W2.
xler8bmw on September 6, 2009 at 9:45 AM
I thank God for the FHA loan I got in 2002. The house I had rented for fourteen years got sold out from under me, and my savings were gone due to a medical emergency the year before. If I hadn’t been able to get a mortgage with 3% down my family of five would have been out in the street. I bought within my means, and when the on-paper value more than doubled in subsequent years I didn’t believe it, didn’t “take money out” of my house. I’m now even, or possibly slightly under water, but I have a good house to raise my kids in and I’ve never been late on a mortgage payment. The key here I think is that I didn’t get greedy, and I didn’t trust the “free money” aspect of the real estate boom. I generally oppose government interference with markets, but the FHA saved my bacon. It just needs a strong injection of prudence form now on.
Tyrone Slothrop on September 6, 2009 at 9:59 AM
Our monetary system cannot be allowed to survive and must be destroyed if we are to be absorbed into the “One World” system. Getting governments and people to agree to this is impossible, but if you take their money away or make it worthless, then offer them a “do over” only with a unified currency, its a hell of a lot easier to merge peopl and former governments into a conglomeration.
Formalizing that conglomeration would be the final step in a “One World Government” supported by the Global currency.
Its incrementalism, but its going to start happening at an ever accelerating pace.
44Magnum on September 6, 2009 at 10:06 AM
Dodd and Franks are working hard to get an executive bonus I guess huh!
bluegrass on September 6, 2009 at 11:27 AM
For me, the question is when will the hyperinflation arrive?
People are losing jobs, so less consumerin’ is going on. They’ve hit a wall as far as the extension of more credit. It’s said that the savings rate is increasing, but money that pays off debt is counted as “savings.” All of the aforementioned are deflationary, at least in the short term.
When the Fed parked treasuries in banks to beef up their ballance sheets, that did nothing to increase the amount of money they loaned, which is a function of the creditworthiness of the customer, not of their need for cash. Without the ability to either earn more money or to go more in debt, the consumer is not going to rescue this economy, nor is he going to stoke inflation. When necessities go up in price due to the cost of underlying commodities, such as oil, without more income or more earnings the consumer will shift resources away from discressionary spending, and things once considered necessities will not be so. All that is deflationary.
Not to mention that grocery stores won’t get rich off higher food prices any more than gas stations will get rich off higher oil prices. They will probably hold their per-unit profit due to competition, or it could be cut due to inability to pass along cost increases immediately. So, as consumption is cut by rising prices they will be pinched, and their employees wages will be hit. That is also deflationary.
If treasuries are redeemed by the printing press, and those fresh dollars go towards debt service, that is not inflationary. If those dollars go into commodities, pushing those prices up, then again without the consumer having additional financial resources he will have to withhold purchases from the discretionary and used-to-be-necessity-but-now-I-can-do-without spending, which is deflationary.
shuzilla on September 6, 2009 at 12:17 PM
Spread this http://www.nytimes.com/1999/09/30/business/fannie-mae-eases-credit-to-aid-mortgage-lending.html?sec=&spon= as far and wide as you can. NYT, no less. This economy CANNOT be blamed on conservatives.
13Girl on September 6, 2009 at 1:40 PM
Right before I left the mortgage business (Thank You, Jesus), the loan officers who had made good money pushing sub-prime loans had shifted gears and were suddenly all FHA experts.
It was easy and predictable: all the sub-prime mortgage lenders had gone bankrupt, and the loans no longer existed. FHA underwriters were approving loans that made no sense whatsoever, using income documentation that is outside of FHA guidelines, and the wheel keeps on turning.
Welcome to the double-dip housing recession, boys.
Jaibones on September 7, 2009 at 1:15 AM
Best quote. Evah!
One Angry Christian on September 7, 2009 at 6:05 PM
Comment pages: « Previous 1 2