Ahem... consider me shocked at this Reuters story. Who could ever foresee fraud, especially at the FHA which now has overtaken the entire US mortgage market - an institution which until a few weeks ago did not even have a risk control officer? [Dec 11, 2008: Freddie, Fannie Considering Waiving Appraisals for Refinancing]

As for FHA? Cmon now... we are going from semi government (Fannie/Freddie) to fully government efficiency? Cripes.

  • ...some housing industry experts worry that F.H.A. may soon be hit by a wave of mortgage-related fraud and abuse that it is ill prepared to deal with.
  • Over the years, the Department of Housing and Urban Development, which oversees F.H.A., has been slow to weed out mortgage lenders that abuse or defraud the agency and profit through means like certifying unqualified borrowers. (the circle of life - isn't this how we got here in the first place?)
  • There are also growing concerns that subprime fraud artists have set their sights on F.H.A. “It looks like an incoming tsunami,” said HUD’s inspector general, Kenneth M. Donohue.
  • The fallout for both homeowners and taxpayers could be substantial if F.H.A. becomes the next housing domino to teeter.
  • And a HUD audit released this month suggests that fund may soon face trouble again; over the fiscal year, its capital ratio dropped to 3 percent, from 6.4 percent, reflecting a sharp increase in claims. By statute, that capital ratio must be at least 2 percent.

Gosh we are almost replicating to the shade of black v white, the exact same steps of 2003-2007 that got us here the first time around. But this time we skip go (the banks) and the bailouts will be hidden on the balance sheet of the Federal Reserve as the great sucking sound you hear is all these loans being hidden inside the offices of Ben Bernanke aka The Great Liquidator.

Oh well all we can do is spit in the wind and chuckle... should I even bother adding this to the list since its not FHA specific?

  1. Warning: [May 6, 2009: FHA - The Next Housing Bust]
  2. Warning: [May 8, 2009: Minyanville - Subprime Lending is Back with a Vengeance]

  3. Warning: [May 13, 2009: Tax Credit as Mortgage Down Payment Now Official Federal Government Policy]
  4. Warning: [Jul 6, 2009: WSJ - No Money Down or Negative Equity Top Source of Foreclosures]
  5. Warning: [Aug 12, 2009: WSJ - The Next Fannie Mae - FHA/Ginnie Mae]
  6. Warning: [Aug 14, 2009: Ginnie Mae CEO Resigns After 1 Year on the Job]
  7. Warning [Sep 18, 2009: Washington Post - FHA's Cash Reserves Will Drop Below Requirement]
  8. Warning [Oct 14, 2009: NYT - FHA Problems Raising Concerns of Policy Makers]

Well not to worry I am sure - as the Wall Street dogma goes... if the stock market is going up, everything must just be fine in the Ponzi scheme economy.

For an alternative to that view, please see:


Dooo - dooo doo dooo doo doo

  • Thousands of individuals claiming the first-time home buyer's $8,000 tax credit may have been trying to scam the system, including purported 4-year-olds and illegal immigrants, according to a watchdog report released Thursday.
  • Treasury Inspector General for Tax Administration J. Russell George told a House panel that more than 19,000 people filed 2008 tax returns claiming the credit for homes they had not yet purchased.
  • George said his office had identified another $500 million in claims, by some 74,000 taxpayers, where there were indications of prior home ownership.

Let's stop there... we were told that this wonderful credit only added about 350,000 additional sales... i.e. people who would of not bought a home if not for the credit. So assuming a goo dportion of the 74K + 19K = 93K were part of that group, it seems we spent $16 billion for about 260,000 additional home sales.

I'm no math genius but that means we spent $61,000 for each incremental home owner (i.e. those who would not of bought a home without a tax credit) to buy a home. Sounds like a great use of our money. By the way, even the National Association of Realtors agrees with the roughly 350,000 figure. [Sep 1, 2009: Cash for Clunker Housing Working Wonders] But of course this not biased group says we should extend the plan - after all its working great... at putting taxpayer money in their pockets.

  • Assuming four-fifths of those (subsidized) homes were sold by realtors at a 5% fee, and that the average home price is $150,000, then the tax credit has put $2.6 billion in the pockets of brokers.

Doo doo doo do doo do do.

More....

  • He told a House Ways and Means oversight subcommittee that they also found 580 taxpayers under the age of 18 who claimed $4 million in first-time home buyer credit. One was 4 years old.

580 more frauds? $4 million? Ah, just a rounding error - just put it with the rest of the IOUs!

  • Extension in its current form would cost about a $1 billion a month. A proposal in the Senate to double the credit and extend it until June would cost about $17 billion.
  • The report further faults the IRS for failing to take its advice that a third party be required to document an individual claiming the credit actually purchased a home. (that is so pathetic; talk about shouting from the mountain - fraudsters... come to us!)

Anyhow, just smile to yourself as you hear great tales of housing rebounds, and remember how the government supported economy really works. (borrow money we don't have from the future, to create prosperity today! Don't worry about the bill - someone else deals with that minor issue) Bravo to the 4 year old by the way - I am sure one of those mornings in May, June, August et al we rallied the stock market 2% on housing strength based on his work and many others like him. Good work people - you've added untold billions of market cap to the stock market via your innovation.