Mortgage Mess, Haven't We Learned Anything?

The Washington Independent released a story today on how Fannie Mae and State housing agencies are offering "little money down mortgages".  For as little as $1000.00 down you can obtain a mortgage through Fannie Mae or State Agencies.  But the deal doesn't stop there, it offers assistance if the homebuyer becomes unemployed, gets lowered fees and doesn't require them to pay for mortgage insurance.  Some states are requiring a 680 or better credit score, but rules vary by location.  What a deal, but who pays for these mortgages if they go into default?  Will the states that are already billions in debt for there 2010 budget cover those defaults?  Where is Fannie Mae getting their funds for defaults if they happen?  At $1000 or nothing down does the owner really even have any skin in the game if the mortgage goes underwater?  It seems like we played this game before.  In a post from August 4th called "Extened and Pretend" I covered an article by the Huffington Post outlining a default percentage of 40% for Home Mortgage Modification Program".  What makes this so different?  Is this an attempt to keep housing prices elevated, as more people are eligible to purchase?  Finally, what happened to ensuring sound fiscal policy, encouraging potential buyers to make better decisions, instead of encouraging them to simply buy what they cannot afford?  [ read more... ]