The president's proposal Friday to allow more troubled borrowers to refinance with Federal Housing Administration-insured loans will push the agency to fulfill its historical mission and try to keep a bad situation from getting worse, experts said. The FHA, established in 1934 during the Great Depression to create more housing opportunities, helps those with low or moderate incomes or flawed credit histories gain housing through its insured loans that require relatively low down payments and have more underwriting flexibility compared with conventional mortgages. Along with the Veterans Administration's mortgage program, the FHA helped spur the post World War II housing boom in the U.S. by making affordable mortgages available to Americans of modest means. The FHA's mission has been to try to provide products that are "actuarially sound" and that the private sector may not be providing due to fears of a lack of profit, Belsky said. In recent years, FHA-insured loans have lost market share to lenders offering subprime and exotic mortgages, according to experts.
There has to be a limit to all the largess of governments. Nobody knows, however, what the limit really is.
People ask. Governments give. Rightly so. Until the system breaks down. Distortions are created. Cracks become increasingly more visible. Eventually the markets always win. Our challenge is to stay on the side of the markets.
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George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
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