August 23, 2007 (LPAC)--The White House and its allies in the Congress--including Rohatyn-Democrat Sen. Chris Dodd of Connecticut--are setting their sights on the Federal Housing Administration, to loot the FHA's current reserves of $22 billion, to help bailout bankers. The FHA was created in 1934, to insure mortgages, and allow low down payments for homes during the Great Depression. The Washington Post today reports that the White House is looking at the FHA to take over sub-prime loans, freeing up the predator lenders which looted the population with the "bait and switch'' loans to begin with.
White House spokesman, Tony Fratto announced that it would have been "better'' if the FHA had provided loan guarantees, rather than using the sub-prime bubble - a bubble which the White House supported and described as a demonstration of its economic policy success.
As the foreclosure panic deepens, the Senate Banking Committee, headed by Dodd, is hashing out legislation to "reform" the FHA, (i.e. turn it into a cash cow for the Administration.) "The Expanding the American Homeownership Act," known as FHA Reform or Modernization, passed the House by wide margins last year, and is designed to relax the regulations currently governing the FHA, enabling it to insure riskier and higher mortgages (the limit is currently at $391,000).
The White House is demanding that the House Financial Services Committee authorize the FHA, 1) to guarantee no-money-down loans, rather than the current statutory 3% minimum down payment 2) to allow the FHA to "price loans for risk", matching the premium amount with the credit profile of the borrower, replacing the current structure in which there is a standard premium amount for all borrowers, and 3) to raise the FHA's loan limits so it can serve more borrowers buying very expensive homes.
Sens. Chris Dodd and Richard Shelby (R-Ala) are, according to The Hill of August 15, likely to strike a deal soon on this legislation, sponsored by Dodd and Sen. Mel Martinez (R-Fla). The House version was introduced on April 6, 2006 by Reps. Bob Ney, Maxine Waters, Gary Miller and Patrick Tiberi.
