Anytime our government gets involved with fixing a problem a pattern emerges. First, it always costs more than the original estimate. Remember cash for clunkers? The budget was gone in the first week. Then, fraud shows up. Finally, we find the fix caused a bigger problem somewhere else.
The housing problem was to fixed by an $8,000 first time buyer credit. It was part of the stimulus package. It was used by 40% of the first time buyers this year. But, when it ran out pressure was put on to extend the program. Plus, it was sweetened to qualify couples who make $225,000 instead of the initial $150,000 maximum.
With one out of four mortgages in America under water, or the house is worth less than the mortgage, we need all the help we can get. So, why criticize the plan?
There’s that nasty fraud problem. The cost for the program is expected to be $15 billion in 2009, more than double the cost when Congress approved the bill. And, at least 19,000 filers did not even buy a house. Another 74,000 filers claiming $500 million already owned a house.
Why can the private sector run a special deal and come in on or under budget and put in enough security to protect against fraud and the government might as well hang out a sign, “fraud encouraged.”
But the worst is yet to come. This program might bankrupt the FHA. Most of the houses bought on this plan are FHA financed. In fact, most of the mortgages period today are FHA insured. If I buy a house for $200,000 I have to come up with 3.5% for a FHA insured loan. I will get my $8,000 back from the tax credit, so I can cover the down stroke and the closing costs.
The FHA may run out of money as early as 2011. What a surprise. The government comes up with a plan that allows people to get a house with no money again by using the tax credit and the FHA, and we have a pretty unstable portfolio of loans in the FHA.
We try to fix a broken problem and we break something else.
And, you want the government to run health care?
