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Mortgage Mess

Published 11/22/08 Dustin Ensinger - Print Article
E-mail - editor@economyincisis.org

They’re at it again. The same greedy shysters who caused the housing bubble to burst and brought on the current financial crisis through questionable - and sometimes downright illegal - lending practices are once again trying to make $1 out of 15 cents by issuing loans to people that probably do not have the ability to pay. This time though they are exploiting a federal program designed to help working-class families achieve home ownership.

For years, the Federal Housing Administration has doled out federally-insured loans to people of modest means to encourage home ownership. Now that the subprime market has all but collapsed, the same people that brought it down have found a new and improved way to take advantage of the poor, the naïve and the taxpayers of this country. The government has recently expanded the program to help stabilize the housing market, but these shady lenders threaten to thwart any progress that could be made.

Analysts say that the FHA is being overloaded with loans likely to end up in default from aggressive and reckless lenders. This will surely cost the taxpayers in the end.

One estimate puts the cost to the taxpayers in the $100 billion range over the next five years. “Within the next 12 to 18 months, there is going to be FHA-insurance Armageddon,” predicts Gary Lacefield, a former federal mortgage investigator.

Since mid-2007, the number of FHA licensed lenders has increased from 16,000 to 36,000. In January the agency guaranteed just 60,000 loans. By Sept., that number had more than doubled to 140,000. Currently, 26 percent of all new mortgages being issued nationwide are FHA guaranteed, up from just 4 percent one year earlier.

One such lender is still issuing loans despite numerous legal actions being taken against it for deceptive practices. The judge in one of those cases declared “The crooks in prison-wear are easy to spot. Those in business-wear are not, though they do no less harm to their unsuspecting victims.”

Source BusinessWeek:

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.

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Article Comments From Readers

guest says "MORTGAGE MESS" on 11/22/08
YOU HAVE AN INEPT GOVERNMENT, HANK PAULSON, BARNEY FRANK AND ALL THE PRESIDENTS MEN PUTTING THIS MESS TOGETHER, SO THESE GUYS THAT CAUSED THE MESS IN THE FIRST PLACE ARE TAKING ADVANTAGE OF THE MESS THEY CREATED BECAUSE THE ONES TRYING TO FIX THE MESS HAVE REALLY SCREWED UP THE FIX,NOW EVERYBODY IS BECOMING A BANK TO GET TO THE TROUGH,GOOD OLD AMERICAN INJUNITY,THE ONLY ONES LAUGHING ALL THE WAY TO THE BANK-NO SORRY THEY DONT HAVE ANY MONEY, TO THE OFF SHORE BANK ACCTS TO HIDE THE MONIES THAT THIS SO CALLED GOVERNMENT IS HANDING OUT LIKE CANDY-HELL IM GOING TO TURN MY SMALL BUSINESS INTO A BANK, BEACUSE THATS ALL IT TAKES TO GET A HANDOUT, MEANWHILE JOB LOSSES,BANKRUPTCYS,FORECLOSURES,BUSINESSES CLOSING, WHAT A BEAUTIFUL JOB DONE BY ALL