![Get comfortable. (wa wa)
This crisis isn’t going anywhere thanks to new interventions that will only prolong the agony by delaying determination of value and keeping private interests from participating. For example:
Under new rules that take effect in October, the FHA will be able to insure an additional $300 billion of troubled mortgages. Another federal program, launched late last year, lets homeowners refinance high-cost subprime loans into FHA-backed mortgages with lower fixed rates. That new rule authorizes the FHA to refinance up to 500,000 loans.
The worry is that the FHA will stumble under the extra weight. By some estimates, the new initiatives could double the agency’s loan volume. Already, its share of the housing market has ballooned to more than 14% in 2008. And many of the new loans may be riskier than the ones already on the FHA’s books. “If you shuffle around who owns these loans, nothing is going to change,” says Robert A. Eisenbeis, a retired director of research at the Atlanta Federal Reserve and an economist for money manager Cumberland Advisors. “We’re going to end up looking at losses that are going to make the [savings and loan] crisis look like peanuts.”](http://24.media.tumblr.com/Anhohk1sae1elw81Z4GCPjmro1_400.gif)
Get comfortable. (wa wa)
This crisis isn’t going anywhere thanks to new interventions that will only prolong the agony by delaying determination of value and keeping private interests from participating. For example:
Under new rules that take effect in October, the FHA will be able to insure an additional $300 billion of troubled mortgages. Another federal program, launched late last year, lets homeowners refinance high-cost subprime loans into FHA-backed mortgages with lower fixed rates. That new rule authorizes the FHA to refinance up to 500,000 loans.
The worry is that the FHA will stumble under the extra weight. By some estimates, the new initiatives could double the agency’s loan volume. Already, its share of the housing market has ballooned to more than 14% in 2008. And many of the new loans may be riskier than the ones already on the FHA’s books. “If you shuffle around who owns these loans, nothing is going to change,” says Robert A. Eisenbeis, a retired director of research at the Atlanta Federal Reserve and an economist for money manager Cumberland Advisors. “We’re going to end up looking at losses that are going to make the [savings and loan] crisis look like peanuts.”
