Software Nerd

Tuesday, October 07, 2008

Tomorrow's Sub-Prime Losers

Many have stopped giving mortgages to poor, high-risk borrowers. No surprise there. Indeed, in the current climate of fear and searching for new capital, the pendulum has swung to being extra-cautious.

Does this mean that poorer borrowers who might have otherwise been able to convince good lenders to give them a mortgage will have to wait a few years? No... it might have... in a free-market, but the Federal Housing Administration (FHA) has ridden to the rescue.

According to Bloomberg, over the next three years, the FHA will underwrite $300 billion worth of high-risk mortgages. How good are these mortgages, according to the Congressional Budget Office (not some free-market think tank, skewing the numbers): "The Congressional Budget Office estimates that 400,000 households will get FHA- insured loans and about one-third of those will fall behind again on their new loans."

Once more, fact trumps fiction!

Why aren't millions writing angry letters to Congress, protesting this bailout of Main Street?

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  • Those who do not properly identify cause and effect are doomed to repeat their mistakes.

    The narrative was that this was wall st. greed. It could NOT have been these poor folks who just want a house of their own.

    I am more pessimistic than I have been in a long time. The mood of the country has changed in littler over 12 months.

    By Blogger Kendall J, at 7:20 PM  

  • I'm a bit pessimistic too. Not directly about the stock-market collapse; but, about the lessons that will be drawn and implemented.

    This downturn will likely be like the great depression in this intellectual sense: the consensus view will be that the government had to act to resuce Capitalism from its "worst excesses", just as they are fabled to have done during the Great Depression.

    By Blogger softwareNerd, at 9:44 PM  

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