Obama appears poised to create another housing bubble, like the one that burst in 2007, according to the Daily Caller. Despite the fact that the Federal Housing Administration is in severe debt that threatens its future, the Obama administration is encouraging banks to give out more home loans to applicants with questionable finances–high risk mortgages. These mortgages are backed by the tax-payer funded FHA, so that once again when people cannot pay back their mortgages, we will all be on the hook for the costs.
The Obama administration, which reportedly believes that the housing recovery is “leaving too many people behind,” hopes to encourage lenders to use “more subjective judgment” in offering loans to people with low credit scores and to people who “owe more than their properties are worth” in order to allow them to refinance at current interest rates.
Although this is considered by most to be the same type of lending practices which created the 2007 housing crash, the administration claims it will be different this time because of new policies. Never-the-less Obama has assured banks that if they lose on the loans, the only financial loser will be the FHA, and therefore, the taxpayer.
The FHA’s 2012 audit found that the agency has a negative economic value of $34 billion, leading some to predict the inevitability of a taxpayer bailout.
But some, including House Financial Services chairman Jeb Hensarling, claim that the FHA’s finances are even worse than they appear. He cited numbers that say the “FHA has a net worth of negative $26 billion and a total capital shortfall of $47 billion” and would require between $50-$100 billion in cash injection–AKA a bailout–to save the administration’s finances. And for the past 4 years Obama administration projections suggested the capital of the FHA would be going up, while reality showed that the capital in the organization went straight down. So after the same lending practices led to the 2007 housing crash, and after 4 years of being wrong about the direction of the FHA, Obama is ready to use the organization to back up risky loans with taxpayer money.
“Insanity: doing the same thing over and over again and expecting different results.” -Albert Einstein