Subprime Lending II: Electric Boogaloo

Here’s a little story in today’s Washington Post about foreseeable consequences. With the collapse of the subprime market, displaced borrowers are flocking to FHA mortgages. The FHA is in essence the government arm charged with subprime lending, and is currently the only game in town. Now the government has its undies in a bunch because borrowers are defaulting in huge numbers, including first payment defaults. ‘Puter has the following analysis, free of charge, for the Obama Administration: Duh.

When the government lends money with down payment requirements not available in the free market, and mandates that these loans be made to people on the basis of race and location, you’re going to have problems. Just like the subprime market.

To WaPo’s credit, it does identify one of the main causes of the mortgage meltdown. Brokers are paid their commissions at the time of origination; there is no performance based component. If the regulators really want to prevent many of the bad loans from being made, they would require a commission structure based on loan performance, not on origination. For example, the broker would receive a quarter of his commission at closing, then the remainder over time, based on borrower’s pay history. Of course, the government really doesn’t care about performance, despite all its sturm und drang. All it cares about is buying off constituents by shoveling free money into their pockets.

Additionally, claiming that first payment defaults are a sign of “impropriety and fraudulent activity” is disingenuous. Good risks generally don’t take FHA loans. They have higher up front costs and all sorts of crazy origination requirements. Thus, they take longer to close. Good risks can usually get cheaper money elsewhere. FHA’s target population is people who can’t get a loan without government assistance. It’s welfare for the prospective homeowner. What the heck did the government expect?

If you’re going to take a course of action where the outcome is fairly certain, don’t insult ‘Puter’s intelligence by pretending that you couldn’t possibly have foreseen the result.

'Puter

Always right, unless he isn’t, the infallible Ghettoputer F. X. Gormogons claims to be an in-law of the Volgi, although no one really believes this.

’Puter carefully follows economic and financial trends, legal affairs, and serves as the Gormogons’ financial and legal advisor. He successfully defended us against a lawsuit from a liquor distributor worth hundreds of thousands of dollars in unpaid deliveries of bootleg shandies.

The Geep has an IQ so high it is untestable and attempts to measure it have resulted in dangerously unstable results as well as injuries to researchers. Coincidentally, he publishes intelligence tests as a side gig.

His sarcasm is so highly developed it borders on the psychic, and he is often able to insult a person even before meeting them. ’Puter enjoys hunting small game with 000 slugs and punt guns, correcting homilies in real time at Mass, and undermining unions. ’Puter likes to wear a hockey mask and carry an axe into public campgrounds, where he bursts into people’s tents and screams. As you might expect, he has been shot several times but remains completely undeterred.

He assures us that his obsessive fawning over news stories involving women teachers sleeping with young students is not Freudian in any way, although he admits something similar once happened to him. Uniquely, ’Puter is unable to speak, read, or write Russian, but he is able to sing it fluently.

Geep joined the order in the mid-1980s. He arrived at the Castle door with dozens of steamer trunks and an inarticulate hissing creature of astonishingly low intelligence he calls “Sleestak.” Ghettoputer appears to make his wishes known to Sleestak, although no one is sure whether this is the result of complex sign language, expert body posture reading, or simply beating Sleestak with a rubber mallet.

‘Puter suggests the Czar suck it.