“Worst Crisis.. Ever!” (In my best Simpsons comic-book guy voice)

According to this article we are experiencing the most severe credit crisis in U.S. history where over 14% of sub-prime loans are now defaulting. That number is incredible, and in severe states like Michigan, 1 in every 100 houses are in some stage of foreclosure.

Whenever you have the lethal combination of a crisis that affects this many people, and a president with popularity at an all time low, we can expect only one thing: Bailout!

Thus begins the Federal Housing Administrations foray into helping out delinquent owners (i.e. people who shouldn’t have been able to afford a house in the first place) and bailing out loan issuers who made the stupid deals to begin with.

Some of the items that bush has pushed:

  • Raise the loan limit from$202,000 to$262,000
  • Remove the 3% equity ownership minimum
  • Homeowners avoid taxes on forgiven debt if a lender agrees to alter the terms of a loan.

To be honest, this is a publicity move and doesn’t help the underlying issue. With the FHA always there to bail people out, the loan issuers will become more predatory, and people will continue borrowing beyond their means.

This does not bode well.

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