Subprime lenders’ current scheme

Subprime lenders’ current scheme November 26, 2008

In the dentist’s office, I came across this from BusinessWeek:

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.

For generations, these loans, backed by the Federal Housing Administration, have offered working-class families a legitimate means to purchase their own homes. But now there’s a severe danger that aggressive lenders and brokers schooled in the rash ways of the subprime industry will overwhelm the FHA with loans for people unlikely to make their payments. Exacerbating matters, FHA officials seem oblivious to what’s happening—or incapable of stopping it. They’re giving mortgage firms licenses to dole out 100%-insured loans despite lender records blotted by state sanctions, bankruptcy filings, civil lawsuits, and even criminal convictions.

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. Inside Mortgage Finance, a research and newsletter firm in Bethesda, Md., estimates that over the next five years fresh loans backed by the FHA that go sour will cost taxpayers $100 billion or more. That’s on top of the $700 billion financial-system rescue Congress has already approved. Gary E. Lacefield, a former federal mortgage investigator who now runs Risk Mitigation Group, a consultancy in Arlington, Tex., predicts: “Within the next 12 to 18 months, there is going to be FHA-insurance Armageddon.”
"Senile. Incompetent. Incapable. Buffoonish. Petty. Dictatorial. Fascistic. Anti-democracy ... crass ...So, one President is pretty ..."

“Ridicule Is Man’s Most Potent Weapon”
"True. Lots of other words come to mind. Senile. Incompetent. Incapable. Buffoonish. Petty. Dictatorial. Fascistic. ..."

“Ridicule Is Man’s Most Potent Weapon”
"Sort of like the faux caring exhibited towards illegal alien children being held in detention ..."

“Ridicule Is Man’s Most Potent Weapon”
"Yeah, that's right, that's the ticket."

“Ridicule Is Man’s Most Potent Weapon”

Browse Our Archives

Close Ad