If there was ever any proof needed that government is run by a bunch of idiots, this is it.
After bailing out Fannie Mae and Freddie Mac to the tune of almost a trillion dollars, one might think that government had learned its lesson about loaning money to people for houses who either can't afford it or have proven to be bad risks in the past.
Enter Ginnie Mae - the Government National Mortgage Association - whose parent, the FHA, has quadrupled its loan portfolios since 2006. Ginnie has mostly been issuing the same kind of mortgage backed securities to guarantee loans made to bad risks that were made by Fannie Mae.
Very good explanation of this in a Wall Street Journal editorial:
On June 18, HUD's Inspector General issued a scathing report on the FHA's lax insurance practices. It found that the FHA's default rate has grown to 7%, which is about double the level considered safe and sound for lenders, and that 13% of these loans are delinquent by more than 30 days. The FHA's reserve fund was found to have fallen in half, to 3% from 6.4% in 2007-meaning it now has a 33 to 1 leverage ratio, which is into Bear Stearns territory. The IG says the FHA may need a "Congressional appropriation intervention to make up the shortfall."
Don't you just love government nomenclature? "Congressional appropriation intervention" - sounds almost harmless, eh? Except it's a bailout by any other name using our tax dollars to pull bureaucratic chestnuts out of the fire because they were too stupid to learn the lessons from Fannie Mae's downfall.
[Government: when no one pays a price for failure, you guarantee it. Health Care anyone?]
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