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Crash Course
FHA: Another Shoe Dropping
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By Edward Ericson Jr. | Posted 10/9/2009

The Federal Housing Administration's boss is saying he'll need no bailout, "absent any catastrophic home-price decline."

The New York Times is flashing red on this one, and it's an entertaining read.

U.S. Rep. Barney Frank (D-Mass.): A 7-plus percent FHA foreclosure rate is no bad thing: "I don't think it's a bad thing that the bad loans occurred," he said. "It was an effort to keep prices from falling too fast. That's a policy."

FHA-which used to make sellers fix houses to exacting standards-last year put a divorced, bankrupt single mother into a $134,000 "fixer-upper," with just 3.5 percent down. She now spends half her take-home pay on her mortgage-$1,100. And as for the fixing-up part? She took two weeks to clean the garbage in the back yard.

At this rate she should have a nice house in about . . . never.

The Times saves the best for last, though, introducing us to Chaz Fullenkamp, a 22-year-old mechanic in Columbus, Ohio, who this spring paid $179,000 for a house with FHA backing, paid no closing costs, and then applied for his $8,000 first-time homebuyer tax refund.


"I knew in my heart I could not really afford the house, but they gave it to me anyway," said Mr. Fullenkamp, 22. "I thought, 'Wow, I'm surprised I pulled that off.' "

Indeed. In Columbus these days, $179,000 buys a newish four-bedroom, two-and-a-half-bath colonial on a flat lot in a decent school district.

Just the thing for a single 22-year-old guy.

I'm sure there's no more "catastropic home price declines" coming soon.

Email Edward Ericson Jr.

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More from Edward Ericson Jr.

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Plagiarism was policy at Tribune paper, lawsuit claims

Beans and Dread (11/20/2009)
A long-planned homeless center’s expansion got underway last week. Then, a Beans and Bread employee stabbed a client.

Behind That Sign (11/18/2009)
A real-estate agent with bad credit offers financial advice and legal services

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UPDATE: Colonial BancGroup, Taylor Bean and Freddie Mac-who could have seen this coming? in Crash Course 8/10/2009

Mortgage Fraud Pays in Crash Course 7/23/2009

After The Bubble in Crash Course 6/16/2009

SEC to charge former Countrywide CEO in Crash Course 6/4/2009

Fannie-Freddie Updates in Crash Course 4/22/2009

Appraisal Fraud Was (or is) Rampant in Crash Course 4/14/2009

Citi = The Prob in Crash Course 2/23/2009

RIP Tanta in Crash Course 12/2/2008

Bankenstein Lives! in Crash Course 11/24/2008

Tags: FHA, Fannie mae, mortgage fraud

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