Thank You Congress... (especially Fat Ass Barney Frank)... and President Obama...

But the FHA imagines that it can cure the problems created by easy credit by promoting more easy credit.

Is it fair to call that approach shortsighted? Imprudent? Economically fallacious? Sure. But mainly, it's just plain crazy.

http://www.chicagotribune.com/news/columni...,2653953.column

The article is a little misleading. It is true that FHA has not changed it's requirement for downpayment beyond 3.5%, however it has changed several other things, that should improve the quality of the loans. 1. The downpayment can no longer be a "gift" from the seller through money laundering non-profits like ameridream. 2. FHA, and their lenders are beginning to pay attention to this funny thing called a debt-to-income ratio, lenders are limiting more than the past, if they actually all observed the 41% guideline, we would really be in business. 3. FHA now has minimum credit scores on purchases and non-streamline refinances. Lenders are choosing different numbers (620 - 660 minimum), but the point is FHA didn't used to have a minimum.

My last point is more opinion, if lenders continue to tighten requirements, it may cause less future bad loans, however, the housing market will continue to go down, since there would be a lower number of qualified borrowers. Another 10% drop, which is completely possible would create another wave of foreclosures, which does not benefit anyone. In fact, it would make more bad loans. You see, if someone has equity, and cannot pay their mortgage, they may be able to sell the home at fair market value, if they are upside down, it will be a short sale or foreclosure. From the article;

"Not everybody who has negative equity goes into foreclosure, but nearly everybody who goes into foreclosure has negative equity," says Paul Willen, an economist at the Federal Reserve Bank of Boston.

This statement in itself is very misleading...The primary source of the economic boom during the last economic cylce (before the recession) was attributed to the specualtive rise on housing prices over their true economic value...This of which, led to a bubble which could not be sustained..Currently, the market is correcting istself... Government intervention to this market, while leading to stabalization, is placing an unnaturaul subsidy to the true economic value of housing...Allowing housing to re-set to its true economic value benefits new buyers into the market, banks that issue loans on these re-set values (i.e. there not issue loans on inflated values) and the Taxpayer, as we will not be subsidizing or bailing out improper loans...While some may suffer in the short term, society will benefit in the long term..

I don't think it's good policy for the government to be diverting resources to propping up enormous bubbles. Seriously, would life be that bad if home prices fell to levels that were reasonable compared to most peoples incomes? Wouldn't lower home prices lead to more spending money for others and a higher standard of living? I really don't understand the so-called catastrophe that would happen if home prices fell. Let individuals file for bankruptcy. Let rich investors in the banks lose their shirts (which they deserve to do after making those ridiculous loans). Of course, that will never happen because the investors/management of those banks are lining our politicians pockets with money. It is straight bribery and it's disgusting. We need to throw out all the politicians, we need to reform campaign finance and end the conflict of interest our federal government has with the taxpayers.

Subpoenas for Congress: "House to Subpoena Documents on VIP Mortgages for Members of Congress" after months of foot-dragging.

http://www.foxnews.com/politics/2009/10/24...mbers-congress/