I keep reading articles trying to explain the mortgage meltdown, but the mainstream media's coverage almost utterly ignores George W. Bush's war on down payments in his effort to boost minority homeownership by 5.5 million. On Google News, the only reference over the last month to Bush's 5.5 million household goal are columns by Rod Dreher and Ross Douthat, both of whom no doubt heard about it from me.
It's like that Star Trek episode where an evil computer takes over, but Kirk and Spock make it overload its circuits by posing logical conundrums for it to figure out like:
The next thing I will say is a lie.
The last thing I said is the truth.
Or maybe not exactly that (it's been 40 years since I watched that episode), but close.
Anyway, in regard to Bush's plan to expand minority homeownership by debauching traditonal credit standards, the media reason (read with Stephen Hawking-style computer accent):
Bush is evil.
Minorities are good.
DOES NOT COMPUTE.
Best not to think about it or smoke will come out of our brains. Let us never mention it again.
I did notice that James Bovard figured out what was going on over three years ago in a June 11, 2005 column for Lew Rockwell entitled "Bush Profiteering from Housing Defaults." It also explains what the Nehemiah Corp. is up to:
President Bush is determined to end the prejudice against people who want to buy a home but donâ€™t have any money. Since he became president the U.S. Department of Housing and Urban Development has spent more than $120 billion. HUD public-housing projects continue to devastate poor neighborhoods. HUD largesse to local governments continues to finance the confiscation and demolition of private homes, and HUD programs continue to spur fraud and corruption around the nation.
Bush has done almost nothing to reduce HUDâ€™s damage to America. Instead, he is devoting himself to expanding home giveaways. He proclaimed on June 16, 2003,Homeownership is more than just a symbol of the American dream; it is an important part of our way of life. Core American values of individuality, thrift, responsibility, and self-reliance are embodied in homeownership.In Bushâ€™s eyes, self-reliance is so wonderful that the government should subsidize it.
Bush could be exposing taxpayers to tens of billions of dollars of losses, luring thousands of low- and moderate-income people to the heartbreak of losing their first house, and risking wrecking entire neighborhoods. Bushâ€™s housing initiatives â€“ especially his â€?American Dream Down Payment Actâ€? to give free down payments to selected home buyers â€“ were key planks in his reelection campaign. He is also pushing Congress to enact a law to permit the feds to give zero-down-payment mortgages.
The Bush â€?Dream Actâ€? and the zero-down-payment plan are modeled after â€?down-payment assistance programsâ€? that have proliferated in recent years. These programs, often engineered by nonprofit groups, routinely involve a home builder giving a â€?giftâ€? to the nonprofit, which provides a home buyer with money for the down payment. The price of the house is sometimes increased by the same amount as the builderâ€™s â€?gift.â€? Almost all the mortgages created with down-payment assistance end up being underwritten or guaranteed by either the Federal Housing Administration (FHA) or Ginnie Mae (the Government National Mortgage Association).
Free down payments carry catastrophic risks. The default rate on mortgages from the largest down-payment-assistance organization, Nehemiah Corp., is 25 times higher than the nationwide mortgage-delinquency rate, according to the HUD inspector general. The default rate on Nehemiah mortgages quadrupled between 1999 and 2002, reaching almost 20 percent. The I.G. warned that permitting the Federal Housing Administration to insure mortgages made with gifts from down-payment organizations is â€?endangering the FHA insurance pool.â€? HUD currently has no idea how many of the loans that the FHA is underwriting are closed with down-payment gifts.
Bush began pushing his American Dream Down Payment plan in 2002. The administrationâ€™s rhetoric echoed the 1968 Housing Act, which nullified state and local restrictions on where blacks and other groups could live. A June 17, 2002, White House Fact Sheet declared that Bushâ€™s agendawill help tear down the barriers to homeownership that stand in the way of our nationâ€™s African-American, Hispanic, and other minority families by providing down-payment assistance. The single biggest barrier to home-ownership is accumulating funds for a down payment.The Bush administration sounded as if requiring down payments is the new version of Jim Crow laws.