There is an FHA bubble brewing, much as the infamous subprime disaster that still dogs our economy. In the form of the Obama administration’s sanctifying of an FHA=guarantee mortgage down payment for as little as 3 1/2%.
Since too many home owners do not have enough equity in their homes, to keep from being underwater during downturns, this is a guarantee for future disaster. To everyone but a left-leaning populist who is always prepared to blame a banker or other “capitalist” for the ensuing financial debacle.
This is economic suicide because home values are dropping at a faster pace than down payment equity. And the FHA is now taking over credit burdens for Freddie Mac and Fannie Mae in different ways. Delinquencies are eating into the FHA agency’s loan reserves ever-more quickly.
Do not be assured the Federal Reserve will be of help. They are presently in an inflating mode and will be completely useless, as they were in the recent subprime catastrophe.
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