Question: Guess who’s reentering the home mortgage game? Or perhaps I should say, “re-entered.”
Answer: The United States government. In other words: We are. The American taxpayer is becoming the preeminent mortgage lender once again.
And just how “re-entered” are we? Ready for this…? We’re in for one trillion dollars worth of U.S. government backed loans. (Insert Little Old Lady from Poltergeist voice here) We’re ba-ack. I guess what they say is true: in for a penny in for a trillion.
At issue is not just that we have rather insidiously gotten back into the mortgage/lending biz. But that the mortgages we are now backing are eerily familiar. That is, they are of the low to no money down variety, which, ironically, many analysts say, were the sort of loans that helped throw us into the present international financial crisis.
The Department of Veterans Affairs has backed zero down jumbo mortgages for as much as one million dollars with federal law mandating that the VA offer the majority of its mortgage loans without any requirement of a down payment.
Additionally, the U.S. Federal Housing Administration has expanded its June 2010 mortgage loan guarantees to 865 billion dollars! Nearly double what it backed in June of ’07.
Of course, there are legitimate rationales for these government backed, low to no down payment loans. Indeed they have helped thousands of hard working, low to middle income borrowers buy homes who ordinarily wouldn’t be able to do so. However, as our recent past has shown, the bargains currently being made available at the FHA, Department of Agriculture, and the VA could end up propelling us further into the housing market meltdown if this next round of borrowers are unable to make their mortgage loan payments.