New York Times Gets One Right

Sort of.

Today's front page article on the Federal Housing Administration is stunning. The headline, "Easy Loans to Wealthier Areas", suggests that even the Times is alarmed at how reckless the government has become. The article says that some young men were amazed how easily they could borrow from the government to buy homes:

They had only a little cash to bring to the table but, with the federal government insuring the transaction, a large down payment was not necessary.

“It was kind of crazy we could get this big a loan,” said Mr. Rowland, 27. “If a government official came out here, I would slap him a high-five.”

In its efforts to prop up a shattered housing market, the government is greatly extending its traditional support of real estate, including guaranteeing the mortgages of middle-class and even upper-class buyers against default.

Do we think that’s going to end well? Even the Times gets it:

...the policy expansions are creating new risks for American taxpayers.

The Internal Revenue Service is giving tax rebates to first-time buyers, and soon to move-up buyers, in a program beset by accusations of fraud. And the government agency that issues mortgage insurance, the Federal Housing Administration, is underwriting loans at quadruple the rate of three years ago even as its reserves to cover defaults are dwindling.

The government’s generosity with your money will fuel another bubble:

The agent who represented Mr. Rowland and his friends [said] “Once the [federal loan] limits were raised, smart buyers started calling.”

...At Guarantee Mortgage Corporation, which has 150 mortgage brokers in the Bay Area, Seattle and Portland, Ore., F.H.A. loans have grown to about 15 percent of its business, from less than 3 percent a few years ago.

“It sure has helped us put a lot of deals together,” said Guarantee’s chief sales officer, Bob Siefert. He predicts that a quarter of Guarantee’s deals will soon be guaranteed by the F.H.A.

Some F.H.A. borrowers here say they have the cash for a full down payment but would rather invest it in the stock market or use it for remodeling. Others, like Mr. Rowland and his friends, simply do not have the money required by private lenders

Gee, you think maybe they shouldn’t be buying?

Low housing prices help people as well as hurt them.  By artificially raising prices, the Realtor-Big Government Complex cheats honest poor people who would otherwise have been able to afford a first home without begging the government for help.

Government should butt out.