FHA the new subprime hazard

Please consider this discussion of the FHA with Larry Kudlow which I wrote about last month.  My original blog post appears below.

 

FHA - The new subprime hazard

Wednesday, September 2, 2009

With the FHA replacing the subprime mortgage market with ridiculous underwriting guidelines we are setting ourselves up for the next bailout. Why does the government allow this foolishness? Lending with just 3% down is utter folly and the epitome of stupidity. Add the tax credit for people have not owned a home in 3 years (so-called first time home buyers) and that makes it 100% financing. If the market drops another 10, 20 or 30% do you think these borrowers are going to make the payments? Many won't. Too many to sustain the FHA causing it's ultimate failure.