The federal government seems less interested in stopping the subprime mess and more interested in muscling in on the franchise.
Reckless borrowing by unqualified borrowers caused the current housing crash.
Many Congresspeople accused "unregulated" risky lending by the private sector and declared that the solution is authorized risky lending by the government. The difference is that your tax dollars definitely will sit in the pile at the center of the green felt table.
Congress Christens FHA as Our New National Casino
The Federal Housing Administration (FHA) maneuvered to take over the subprime market:
"As an improved alternative to subprime lending practices, Bernardi discussed modernizing the Federal Housing Administration (FHA). 'Reforms must be made for the FHA to adapt to today's marketplace. We have modernized FHA as much as we can but need legislation to truly bring the FHA into the 21st Century. A new FHA could be an antidote for predatory lending and for subprime difficulties,' stated Bernardi" (FHA).FHA "Modernization" and "Bring the FHA into the 21st Century" Are Euphemisms for Bailout-Backed Recklessness to Keep Housing Prices High
Congress' plan to "modernize" the FHA and "bring the FHA into the 21st Century" simply crowns the FHA as the new subprime king, moving the risk rather than eliminating it. In fact, since the FHA has an implicit promise that you will bailout bad loans with your taxes, one could argue that Congress' FHA "modernization" plan increases risk instead of decreasing it.
It only gets worse when you look at the details of new federal loans:
Housing’s New Math: The Seller Pays the Buyer