FHA-Backed Loans: The New Subprime

As if they haven't done enough damage. 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.

Read the whole story here.

Comments

[PhilipTaylor]

IN THIS ECONOMY WE ALL NEED TO WIN!
Bypass these Corrupt Brokers and offer Direct Low Cost Government loans!

A better approach is to have Fannie and Freddie be able to offer automated internet loans using FED Rate + 2% or 3% directly to refi homes and avoid many layers of refinancing fees! Offer this service in libraries for those not having access to the Internet at home!

The automation can do 98% of the verification and loan application and 2% manual to do final check by Fannie and Freddie!