Right Thinking From The Left Coast
Never trust a computer you can't throw out a window - Steve Wozniak

Thursday, August 05, 2010

We Learned Nothing

It’s bad enough that the FHA is still doling out 3.5% down government-backed loans.  But this crosses the border from stupid to obscene:

“Buy new with $1,000 down,” the advertisement says, the words resting atop a trim green clapboard house offset by a bright blue sky. “The time has come. Stop wasting rent check after rent check and start building equity in your own home. And with only $1,000 down, affordable monthly payments and no private mortgage insurance required, the dream is closer than you think.”

It sounds too good to be true. But it is true. This offer does not come from a subprime lender, looking to reel in thousands of unqualified and ill-advised homebuyers, only to slap them with add-ons, fees and variable rates. It is not a teaser or a trick. The advertisement references a program initiated by the National Council of State Housing Agencies and Fannie Mae, the taxpayer-backed, government-sponsored enterprise that buys up mortgages from lending banks.

The pilot program is called “Affordable Advantage,” and it has now been adopted by three states — Massachusetts, Wisconsin and Idaho. (Other states, such as Pennsylvania, California and Colorado, have similar state programs.) The initiative is small, reaching just a few hundred people so far. But it is looking to expand. Given the dangers of these types of mortgages and the specter of the housing bubble, where unconventional loans wreaked disaster, it is also raising questions from wary housing experts and legislators.

The question raised being, “ARE YOU OUT OF YOUR FUCKING MINDS!”

The article goes into why this is a bad problem, none of which is a surprise to anyone with in IQ larger than their shoe size.  Buyers will be immediately underwater, as you have to pony up 6% to sell a house.  A small change in the market will put them even further under.  And, being brutally honest, if you can’t come up with more than a $1000 down payment, you really don’t have a lot of business buying a house.

The authors of this programs are spewing the exact same blither they were spewing five years ago: this is a way for people to build wealth (not really), this can get people acting more responsibly (act responsibly first, then borrow hundreds of thousands of dollars), etc.

This is a small program and will hopefully get killed now that people are finding out about it.  I asked around about this and everyone—from commie pinko liberal to rock-ribbed conservative—thought this was a terrible idea.  But it does show that stupid ideas never really go away in government circles.  They just change names.

Posted by Hal_10000 on 08/05/10 at 10:48 AM in Politics   Law, & Economics  • (0) TrackbacksPermalink
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