cinepro wrote:Analytics wrote:If you think it is absurd for the government to back mortgages to buyers with almost no down payment and bad credit, why did you say above that the past of the FHA is admirable? Loans to people with low down payments and average credit has always been their target niche.
Because in the past, their focus wasn't to keep the housing market (and, by a stretch, "the US Economy") afloat, but instead to lend to people who were otherwise able to pay their mortgage.
See my quote from the last page. Nobody is suggesting HUD should insure loans to people who aren't able to pay their mortgage.
Some borrowers have AAA credit. Others have A- credit or Bbb+ credit. Having less than perfect credit isn't the same thing as being unable to pay your loan, and asking banks to loan to everybody who meets the current FHA standards and not just to those who greatly exceed them isn't the same thing as asking them to loan to people who can't pay.
Regarding your other graphs, I'll just reiterate my point--despite the current situation, the FHA has done a hell of a lot better than the GSE's such as Fannie Mae and Feddie Mac, and has done light-years better than private-market players such as Lehman Brothers and Bear Stearns.