Posted on 04/25/2010 12:50:18 PM PDT by Lorianne
The FHA is no longer the modest agency that helped make homes more affordable to generations of Americans.
It has issued hundreds of billions of dollars of mortgages in the last two years. It’s support for the housing market is expected to redouble once again, growing to $1.5 trillion over the next five years.
Along the way to becoming a behemoth, the FHA has radically transformed its business. Very few people seem to understand how thorough going this transformation has been. In many ways, the FHA is being run like a Ponzi scheme. And like all such schemes, it is likely to eventually fail.
A recent paper titled “Reassessing FHA Risk” may have escaped your notice. It is written in a such a sober and academic tone that it hasn’t attracted the attention it deserves. What it describes is truly horrifying: The FHA is unable to assess the risks it is taken and the losses it will face will be massive. Because it does not appreciate its own risk, it is not adequately taking steps to limit the losses.
(Excerpt) Read more at businessinsider.com ...
“Because it does not appreciate its own risk, it is not adequately taking steps to limit the losses.”
I think they got it backwards. Congress does not want the FHA to take the steps to limit its losses therefore FHA won’t asses the risk.
Or “Ignorance is bliss.”
They’ll have a hard time blaming AIG, Citi, or Goldman for this one and for the paying of the piper for Fannie/Freddie’s unlimited credit line.
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