One U.S. government agency is planning to guarantee billions in new mortgage debt, filling a gap left by private investors in what amounts to a large transfer of risk to taxpayers.
Since the collapse of the housing market last year, the government agency charged with supporting low-end housing has been extending mortgage loans to borrowers with poor credit records and not enough cash for a 20% down payment – the infamous “subprime” borrowers that are often blamed as the original cause of the collapse of financial markets.
In mid-June, the Federal Housing Administration asked Congress permission to back $400 billion in these mortgages in 2010 – its largest request ever. It’s on track to back more than $315 billion this year, covering nearly 20% of all mortgages issued.
Read more about subprime mortgages…
