After two foreclosures and two bankruptcies, Hermes Maldonado is as surprised as anyone that he's getting a third shot at homeownership.The Federal Housing Administration is insuring Mr. Maldonado's loan along with those of many other high risk borrowers. If those loans go bad, the US taxpayer is on the hook for the losses.
The 61-year-old machine operator at a plastics factory bought a $170,000 house in Moreno Valley this summer that boasts laminate-wood floors and squeaky clean appliances. He got the four-bedroom, two-story house despite a pockmarked credit history.
The last time he owned a home, Maldonado refinanced four times and took on a second mortgage. He put a Cadillac and Mercedes-Benz C300W in the driveway and racked up about $45,000 in credit card bills and other debts. His debt-fueled lifestyle ended only when he was forced into bankruptcy.
His reentry into homeownership three years later came courtesy of the Federal Housing Administration.
Today, House Financial Services Committee Chairman Spencer Bachus (R-AL) reports that FHA will be asking for a bailout. Bloomberg News reports:
The agency is “burning through” its last $600 million and FHA officials have briefed him that they will need a financial backstop within a month, the Alabama Republican said during a press conference in Washington….This will be the first time in the FHA's 78-year history that it has asked for a bailout.
FHA insures a portfolio of about $1.1 trillion in home loans and now backs 15 percent of U.S. mortgages for home purchases.
Would it really be so bad if Mr. Maldonado simply rented?
PREVIOUSLY on the housing bubble/mortgage crisis:
•Pres. Clinton and the origins of the housing bubble
•Occupy movement demands banks provide free money
•Rep. Speier rewrites history on mortgage regulations
•Financial crisis in review
•Barney Frank and the collapse of housing prices
•How we got in this economic mess
•Those who do not learn from history