Many moons ago, a giant housing bubble was inflated in the United States. This bubble, as Very Important People have told us, was created because too many Americans "lived beyond their means." They bought houses they couldn't really afford, and then used the temporary price gains in their houses they couldn't really afford to buy cars and TVs and Snuggies they couldn't really afford. (Oddly enough, those same Very Important People actually made the decisions that allowed - even encouraged - all of those bad purchases in the first place, yet we've apparently decided that they're the ones who should be fixing the whole mess.) Once the bubble reached a popping point - as bubbles are wont to do - the system crashed, causing everybody to look back upon what had happened and say, "Gosh, that was pretty dumb. I hope we've all learned something here."
And we did. For about a week and a half. Then, the aforementioned Very Important People got together and determined that the best way to fix the country's economic woes was to have the government sponsor things like this:
Without question, Tejada's loan is toxic--to her and to the taxpayers who are backing the loan. Her house cost $155,000. Tejada's loan was apparently made on a micro-down payment of just 3.5%, the minimum down payment to qualify for an FHA loan. On top of this, however, she got an additional government backed loan to make improvements. Her total loans amount to $183,000. In short, she was immediately underwater on her new house.
The monthly payments on her debt amount to $1328. Her income is $2470, leaving her with just $285 a week to live on. She's paying 54% of her income to make the mortgage payments.
...annnnnd bubblelicious statements like this:
"I bought my house for $155,000. And now, after all the fixing, after all the remodeling, my house is worth $255,000. So just within a month period, I made a $100,000," she tells Market Place's Scott Jagow.
There's some dispute about whether or not that's true, but for the moment, let's assume that it is. Her house is in fucking California. In case you're not in tune with exactly where housing prices are set to keep plunging like an overworked plumber for the next several years, it's... drumroll please... California. And if (or, to be more accurate, when) she gets sick, or loses a job, or gets into an auto accident, or simply can't sell her house for what she needs to sell it for, you get to help cover the losses! Aren't you excited?
This is the same exact plan, only with even worse numbers, that was brought to you by Alan Greenspan a decade ago, then continually reinforced by Ben Bernanke, Hank Paulson, and Timothy Geithner (when he was running the New York Fed). Now Bernanke and Geithner are doubling down, despite their nearly incomprehensible ability to be wrong about all things housing bubble over and over and over again.
At least there's no way this could possibly backfire.
