Did you see the front page of today’s New York Times? (and other newspapers)

With the government (and, yes,  lenders) already using FHA as the new subprime, since the real subprime companies are defunct, it sounds like today’s announcement in effect will have the government one way or the other dumping toxic loans into the FHA bin. Details still to come, but it sounds like the politicians are “saving” homeowners (and giving themselves PR for re-election campaigns) from foreclosure by taking over their loans with the remaining TARP money. I guess if they don’t miraculously start making their payments, the taxpayers will own these houses and the FHA will plummet even more quickly into the red.

Meanwhile, in their (lack of) wisdom they’ve been making it tougher for hardworking homeowners who PAY ON TIME to buy or refi into lower rates.

For example, in order to get a lower rate on an FHA loan, you now must reduce your entire housing payment by 5% — mind you, not just your mortgage payment - even if the lender is picking up the closing costs and the refi is essentially free. Think about it — you are lowering your principal and interest payment, say, $300 a month. Your taxes have jumped, say, $100 a month. You really want to take advantage of lower the mortgage rates to offset your tax increase and save money.

But the government — through FHA — says NO. Why? Because your tax payment has gone up so your total monthly housing savings which might have been 5% prior to the tax increase is now less than 5% due to the tax increase so you become ineigible for a lower payment.

So again we have politiicans dependant on re-election and bureaucrats with lifetime civil service jobs in a position to make your decisions for you. They are somehow saving you from yourself because you are not smart enough to figure out on your own what makes sense for you and your family.

  Will be interesting to see the details. More to follow.