Throw Tomatoes At Me If You Must - FHA and Subprime

Go ahead! Throw tomatoes at me if you must. FHA is a subprime type program.

FHA never left the subprime type market. It just became less popular starting in the late 90's.

You see, before subprime as it's labeled today gained popularity, FHA was the program of choice for subprime type borrowers. That is, consumers with little cash and less than perfect credit.

Personally I'm not a big fan of government programs intended to fix business. But I can't argue a fact. FHA is the most successful government program of all time. The reason is because FHA is a program funded by consumers and FHA's insurance fund is there to cover losses.

Now take a step back for just a moment and let's consider why the subprime industry created such a debacle. It was NOT the fault of loan programs. It was NOT the fault of homeowners. It was NOT the fault of mortgage brokers.

I resent the superiority-complex and finger pointing of the agencies, Fannie and her siblings, at the onset of the debacle as if it were the products, homeowners and mortgage brokers that caused the fall. Homeowners, mortgage brokers and loan products were only the scapegoat.

Had banks been required to maintain higher loan reserves, similar to the FHA insurance fund, they would have been able to ride out storms. Yet in some instances, banks were lending 20 times more than they had in reserves.

Excessive leveraging by banks brought the real estate market to its knees. Talk about living beyond your means.

Now back to today, FHA is again the program of choice for subprime type borrowers but FHA insurance funds have been reported lately as running low. Were any lessons learned?

Will there be enough funds to cover future losses or will the tax payer again be on the hook?

If so, who is the next scapegoat?

Discover why Fannie, Freddie and FHA begin to raise their skirt hems at Mini Skirts And Hope For Homeowners - Part One

Continuing here, discover how a game of musical chairs affects mortgage affordability at Mini Skirts And Mortgage Affordability - Part Two

The intriguing saga of Joe The Homeowner preventing another mortgage debacle concludes at Mini Skirts And Affording A Mortgage - Part Three