It is unbelievable but true that sub-prime lenders are prowling around again. Many of these mortgage lenders, prime architects of this financial meltdown, are strongly active again. Their strategy is based on a long-standing federal plan that was designed to promote ownership of property by insuring the mortgages of modest buyers. The same people who pushed the nation towards this foreclosure tsunami are now trying to reap gains by taking advantage of federally insured mortgages that amount to billions. Washington has come forward to greatly expand the scope of people availing of these loans backed by taxpayer’s money. This is part of the administration’s efforts to prop up the collapsing economy.
For many years, in fact for generations, these FHA (Federal Housing Administration) loans have given a chance to families with modest means, mainly the working class, to own their own houses. But lately there is a danger that in the hands of unscrupulous lenders and their minions, the sub-prime loans will again overpower FHA. Loans will be given to people who do not have the capacity to repay. The FHA officials are either unaware of what is going on or are unable to stop it. FHA is issuing licenses to mortgage firms to hand out 100% insured mortgages. The lenders who are benefiting have dubitable past of state sanctions, bankruptcy filings as well as civil and criminal law suits and convictions.
If this is allowed to go on then the nation will be overwhelmed with another series of defaults leading to foreclosures. Washington will be bound to come forward with a bailout out of astronomical proportions.
According to Inside Mortgage Finance in the coming five years new loans supported by FHA will curdle and turn sour. This will cost the taxpayers another $100 billion at the conservative side. This will be over and above the $700 billion rescue package sanctioned by Congress.
Gary E. Lacefield was formerly a federal mortgage investigator and now in charge of Risk Mitigation Group in Arlington, Texas. He said, “Within the next twelve to eighteen months, there is going to be FHA-insurance Armageddon.” The point to note is that these resilient unstoppable entrepreneurs who take over this dubious field of mortgage are often unseen but never unfelt or puny. Their nefarious activities are once more surging and the consequences coming on top of the previous mayhem will spell doom and disaster.
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