Affordable housing run amok:

A major lesson of Fan and Fred and the subprime fiasco is that no one benefits when we push families into homes they can’t afford. Yet that’s what Congress is doing once again as it relentlessly expands FHA lending with minimal oversight or taxpayer safeguards.

That’s Fannie Mae and Freddie Mac, the government-sponsored lending programs asking a mere 3.5% down, vs. 10% minimum on conventional loans — with 100% tax-paid guarantee on defaults. 

Which guarantee “means banks and mortgage lenders have no skin in the game,” observes WSJ.  No-skin means no risk, means wotthehell wotthehell, let’s do it, why not?  (If this devil-may-care approach was good enough for that cat mehitabel, it’s good enough for us.)

The VA housing program, to site another way of doing business,

has a default rate about half that of FHA loans, mainly because the VA provides only a 50% maximum guarantee. [italics added]

Thus providing “a market test that the loan shouldn’t be made.”

As for the downpayment, the FHA minimum was 20% when the agency opened in the 30s.  In the 60s it dropped to10%, in 1978 to 3% — raised to 3.5% last year.  The road to national meltdown was paved with good affordable–housing intentions.

Among which was the “bizarre initiative” in 2007 and since then to help the FHA “regain market share” as banks chose en masse to go elsewhere, namely to proliferating subprime lenders.  So now we have what WSJ calls “the federal subprime lending program.”

Wotthell, it’s save-the-agency time.  Damn the default rate, full speed ahead.