The Housing Chronicles Blog: FHA-backed loans: the new sub-prime disaster?

Monday, November 24, 2008

FHA-backed loans: the new sub-prime disaster?

Never underestimate the power of greed. That seems to be the lesson of a story published in Business Week magazine on former sub-prime mortgage players now simply transitioning their business models to loans backed by the FHA -- and by extension, the U.S. taxpayer. From the story (hat tip: Brian McDonald):

Thousands of subprime mortgage lenders and brokers—many of them the very sorts of firms that helped create the current financial crisis—are going strong. Their new strategy: taking advantage of a long-standing federal program designed to encourage homeownership by insuring mortgages for buyers of modest means.

You read that correctly. Some of the same people who propelled us toward the housing market calamity are now seeking to profit by exploiting billions in federally insured mortgages. Washington, meanwhile, has vastly expanded the availability of such taxpayer-backed loans as part of the emergency campaign to rescue the country's swooning economy...

As a result, the nation could soon suffer a fresh wave of defaults and foreclosures, with Washington obliged to respond with yet another gargantuan bailout.

Click here for full story -- but sit down first!

1 comment:

Anonymous said...

Interesting article--thanks for sharing. It should come as no surprise that the people who helped create the problem are looking to profit by trying to solve it.