I Need A Drink...

Folks... it's a nightmare... a frigg'n nightmare...

As noted in today's WSJ:

Everyone knows how loose mortgage underwriting led to the go-go days of multitrillion-dollar subprime lending. What isn't well known is that a parallel subprime market has emerged over the past year -- all made possible by the Federal Housing Administration. This also won't end happily for taxpayers or the housing market.

Hey... don't say you haven't been warned!

Last year banks issued $180 billion of new mortgages insured by the FHA, which means they carry a 100% taxpayer guarantee. Many of these have the same characteristics as subprime loans: low downpayment requirements, high-risk borrowers, and in many cases shady mortgage originators. FHA now insures nearly one of every three new mortgages, up from 2% in 2006.

To reiterate: ONE out of THREE new mortgages... up from 2% in 2006.

Hmm... 2006... wasn't that the last year Republicans controlled Congress...???

According to Mortgage Bankers Association data, more than one in eight FHA loans is now delinquent....Another 7.5% of recent FHA loans are in "serious delinquency," which means at least three months overdue.

Great. Just frigg'n wonderful!

The FHA is almost certainly going to need a taxpayer bailout in the months ahead. The only debate is how much it will cost. By law FHA must carry a 2% reserve (or a 50 to 1 leverage rate), and it is now 3% and falling. Some experts see bailout costs from $50 billion to $100 billion or more, depending on how long the recession lasts.

Hey... it's only money, right...??? We can always print more! (Could someone PLEASE get me that drink...?!?!)

Oh... and again to reiterate... a FIFTY to ONE leverage rate... that's the law of the land in the age of Obama, Pelosi, and Reid. Don't blame the bankers. Don't blame Wall Street. That's the law!

How did this happen? The FHA was created during the Depression to help moderate-income and first time homebuyers obtain a mortgage. However, as subprime lending took off, banks fled from the FHA and its business fell by almost 80%. Under the Bush Administration, the FHA then began a bizarre initiative to "regain its market share." And beginning in 2007, the Bush FHA, Congress, the homebuilders and Realtors teamed up to expand the agency's role.

Yep. The Bush FHA. No evasion. No equivocation. Bush was a moron. Yet... 2007... weren't the Democrats in control of BOTH Houses of Congress in 2007....??? So... er... this was a bipartisan decision, huh? Bush... Pelosi, Reid, and the Democrats... homebuilders and realtors who no doubt showered more than generous donations upon both Democrats and Republicans...

The bill that passed last summer more than doubled the maximum loan amount that FHA can insure - to $719,000 from $362,500 in high-priced markets. Congress evidently believes that a moderate-income buyer can afford a $719,000 house....The higher FHA loan ceiling was also supposed to be temporary, but this year Congress made it permanent.

(Where the heck is that drink...?!?!)

Hmm... last summer...? 2008, right? Democrats firmly in control of both Houses of Congress. This year (that would be 2009 - correct?)... we're talking Democrats controlling both Houses of Congress with not George W. Bush in the White House, but rather... oh, what's his name... oh, yes... President Barak Obama occupying the Oval Office.

Great! Change we can believe in! Yep... "compassionate conservatism" to the tune of subsidizing and serving the "needs" of folks in the market for a $362,500 mortgage wasn't enough for Obama, Pelosi, and Reid... no... as the "Party of the Working Class," Democrats obviously saw it as their duty to double down (using our money of course) and support those poor, disadvantaged folk forced to shelter themselves in... er... $719,000 homes.

Folks. You can't make this up! The Wall Street Journal isn't making this up! This is America in the Age of Obama.

When FHA opened in the 1930s, the downpayment minimum was 20%; it fell to 10% in the 1960s, and then 3% in 1978. Last year the Senate wisely insisted on raising the downpayment to 3.5%, but that is still far too low to reduce delinquencies in a falling market.

Great. 3.5%. I'd call this "Change We Can Laugh At" if it wasn't so damned infuriating and depressing. Heck... let's call it "Change We Can Cry At." We should go back to the 20% down payment standard. Period.

Anyway... the link to the full editorial is provided up above. Click and read. Then... make yourself a drink.

God help this once great nation...