The housing crisis was a huge disaster for the US and the world. Yet ALL the causes of it are still there. ALL of them.
The Community Reinvestment Act was never repealed. Yes, Fanny and Freddy are no longer there but the FHA has stepped neatly into their role. Do you think that Wall Street has gone underground? And, of course, Congress is still there promoting house ownership to everyone whether they can afford it or not.
A lot of people think that the Dodd-Frank law was there to solve the causes of the housing crisis. In fact, it did nothing to stop any of the reasons for the crisis.
From today’s Wall Street Journal:
“The Federal Housing Administration is expected to report later this week that it could exhaust its reserves because of rising mortgage delinquencies, according to people familiar with the matter. That could result in the agency needing to draw on taxpayer funding for the first time in its 78-year history.
The FHA guarantees fewer mortgages than either Fannie or Freddie, but it now has more seriously delinquent loans than either of the mortgage-finance giants. Overall, the FHA insured nearly 739,000 loans that were 90 days or more past due or in foreclosure at the end of September, an increase of more than 100,000 loans from one year ago. That represents around 9.6% of its $1.08 trillion in mortgages guarantees.
The FHA’s annual audit estimates how much money the agency would need to pay off all claims on projected losses, against how much it has in reserves. Last year, that buffer stood at $1.2 billion, representing around 0.12% of its loan guarantees. Federal law requires the agency to stay above a 2% level, which it breached three years ago.”