Winners of the rental economy

Via CNN Money:

FORTUNE -- There are still many factors discouraging even the most savvy homebuyers from purchasing a home, but a new class of renters is expected to bring a bright spot to the troubled U.S. real estate market. Prices for rental apartments are expected to rise nationally – by approximately 4.5% in 2011 and up to another 3% in 2012, according to Rent.com...

...Given that many homeowners are still trying to clean up their messy finances, it might be hard to see how higher rents could benefit the overall U.S. housing market. In theory, at least, renting could become so expensive that it costs less to buy a house and make monthly mortgage payments.

In fact, that's happening already, even if it hasn't yet translated to a return to homeownership. In Moody Analytics' latest list of rent ratios for 54 U.S. metropolitan areas, 29 cities fell into the "better to buy" category. With many experts predicting that home prices have further to fall this year and with higher expectations for rentals, more cities could end up on the buy side of the buy-versus-rent calculator.

But much of that will likely depend on huge hurdles weighing on the housing market – namely, record foreclosure rates, high unemployment and tighter lending standards for new mortgages. Areas that continue to experience high foreclosure rates and widespread unemployment, such as Florida and Arizona, might find it more affordable to buy than rent. Yet renting will likely be king in more urban areas with more employment opportunities, such as New York and Seattle. ------

Historically, rising rents are a sure sign of a coming resurgence in housing sales and prices, but this is obviously not a typical downturn. It's hard to predict how long this pent up demand will remain on the sidelines or how long it will take the existing massive over supply to be absorbed down to a healthy level. Moreover, with food and energy inflation worming its way into the broader economy and the inevitability of higher interest rates, would be home buyers may still choose to pay higher rents rather than take on the responsibilities of home ownership. It also remains to be seen just how much more destructive uncertainty our reckless government will inject into the economy and further encourage people and businesses to do nothing.

On the other hand (apologies to Harry Truman), a downturn or crash in the stock and/or bond markets - which is increasingly likely - might make real estate an attractive alternative investment, as it has in the past. There is no significant new supply of single family homes or condos currently on line and existing homes in many markets are selling at or below construction costs. That's not good, but it does mean that the current supply wont have to compete with new construction for some time even after the market turns, simply due to the long lead time required to build new housing.

New housing starts fall 10.6% in April

Via Hot Air:

The housing market continues to decline sharply, according to the latest figures on new housing starts and residential building permits. The Census Bureau reported today that the annualized rate of new residential starts dropped over 10 points from March to April, and that single-family starts dropped 5.1%. Permit applications also declined by 4%, which indicates that no one sees much hope for renewed demand in the market:

Reuters:

Housing starts and permits for future home construction fell in April as an overhang of homes on the market discourages builders from taking on new projects, pointing to prolonged weakness in the housing sector.

The Commerce Department said on Tuesday housing starts dropped 10.6 percent to a seasonally adjusted annual rate of 523,000 units. March’s starts were revised up to a 585,000-unit pace from the previously reported rate of 549,000 units.

Economists polled by Reuters had forecast housing starts rising to a 568,000-unit rate. Compared to April last year, residential construction was down 23.9 percent, the largest decline since October 2009.

Residential construction is being crowded out by an oversupply of used homes on the market, in particular, foreclosed properties, which sell well below their value.

What this typically ignorant journalist is trying to say is that many existing homes are selling below their replacement cost and new construction doesn't pencil out at that price point.

As inflation worms its way into the broader economy, construction costs will rise but wont translate into higher prices for new or existing homes due to an over supply that will not be absorbed any time soon.

We are now entering the summer construction season when industry employment typically rises. Based on this data, that's not going to happen this year and will likely go down

Why the housing market is caught in a liquidity trap

Via CNN Money:

FORTUNE – In textbook economics, lower interest rates typically spur higher investments. Money is cheap. So the assumption is that people, banks and companies will spend more, therefore helping the economy grow.

But that doesn't always work. Sometimes cutting the rate of interest, even to zero, won't necessarily pull an economy out of a recession. British economist John Maynard Keynes called this the liquidity trap -- when virtually everyone becomes so risk averse that banks would rather sit on their cash than offer credit. And even if banks start lending more, people wouldn't want the credit anyway.

It is a grim scenario. And it appears today that no sector in the U.S. economy has suffered more from the liquidity trap than the housing market.

For all the attention policymakers placed on the Fed's actions over interest rates, the cost of borrowing is far from the problem. Record-low mortgage rates have done little, if anything, to encourage home purchases or even refinances. And while home builders way overbuilt in the years leading up to the 2008 housing bust, the fact that mortgage rates have had little influence over home purchases underscores how weaknesses from the demand side (as opposed to the supply side) is perhaps the bigger problem.

The demand side is low because potential buyers don't see a bottom and are fearful of losing money themselves. Moreover, the radically anti-business White House has caused so much uncertainty in the business community that it has trickled down to consumers. People who fear for the future no matter how well they're doing today, generally don't commit themselves to large financial responsibilities like home ownership.

Housing Market Can't Get Going

It's hard to understate just how much damage the Federal Government and its proxies have done to the U.S. real estate market. One of the reasons is that we still don't know how much worse it will be or for how long. Zillow has some new stats:

Home values fell three percent in the first quarter of this year, marking a pace of decline not seen since 2008 when the housing recession was at its worst. Home values fell one percent between February and March and 8.2 percent from March 2010. The cumulative decline in home values since the market peak is now 29.5 percent (see Figures 1 and 2).

Nearly three-quarters (74.5 percent) of homes in the United States lost value from Q1 2010 to Q1 2011. That’s up from Q4 2010, when 69.2 percent had lost value, but is down substantially from a peak of 85.5 percent in Q1 2009.

A record (37.7 percent) number of homes sold in March were sold for a loss. The rate of homes selling for a loss has steadily increased since June 2010.

Negative equity in the first quarter reached new high with 28.4 percent of all single-family homes with mortgages underwater, from 27 percent in Q4.

As your humble real estate expert, I can tell you with complete certainty that I don't have the foggiest idea when the market will begin to stabilize and anyone who tells you they do is full of it.

No one knows how long it will take for all the foreclosures to work their way through an already overwhelmed system. Nor is it clear how many non-performing loans are still on lenders books at full value that are being slowly liquidated lest they go belly up if these securities were liquidated and marked to market today. Those balance sheets are just smoke and mirrors and that's why the Fed is lending them money at 0% and selling them treasuries at 4%. You're paying the bill for this and all the government's other reckless spending through inflation from a debased dollar and debt as far as the eye can see.

Affordable rental housing scarce in U.S., study finds

From The WaPo

The share of renters who spend more than half their income on housing is at its highest level in half a century and it’s no longer just low-income tenants who are feeling the pain, according to a Harvard University study scheduled for release Tuesday.

About 26 percent of renters — or 10.1 million people — spent more than half their pre-tax household income on rent and utilities in 2009. That’s because incomes slipped dramatically from their peak at the start of the decade even as rents kept rising.

Normally, this would be good news for sales as high rents should induce people to buy. Interest rates and home prices are low and there is no significant building of new rental housing. But the government and its cronies have devastated the housing market to such an extent that we still don't where the bottom of the sales market is or when it will reach that point. Millions of homes are still waiting to be put on the market as the system slogs through an unprecedented quagmire of foreclosures. Uncertainty kills markets.

And the recent implementation of the ironically named Dodd - Frank financial bill that is now increasing the cost and reducing the incentive to lend, will only prolong the agony.

It also doesn't help that the economy is still bouncing along the bottom on a path to stagflation.

Multi Family and Household Formation

From the NAR:

In the broad landscape of commercial properties, the multifamily sector has fared comparatively better. Demand for space was modest but positive. Net absorption closed the year at 105,458 units. Yet, there are factors which caused adverse impacts in the sector.

The Mutli-Family sector almost always fares better in a downturn. Companies downsize and disappear, people generally don't. Everyone needs someplace to live and an increasing population softens the blow to these investments:

Household formation seems to be one of those factors. More precisely, the prolonged recession of the past two years has taken a toll on the number of people starting a household. Based on household formation data from the Census Bureau, the 10-year average of new households being formed has been 1.3 million per year. However, this number decreased significantly in both 2008 and 2009. From a decade-high of 3.5 million in 2001, household formation dropped to 772,000 in 2008 and only 398,000 in 2009.

That's actually the bright spot of pent up demand. A household is any separate housing space occupied by one or more people. The drop in household formation means there's a lot of people living together who would rather not, such as the adult child living in your basement. If the economy improves in any meaningful way, that log jam will begin to break and cause a spike in demand for rentals and purchases.

That's a big if, of course and the expected rise in interest rates along with the economy strangling uncertainty coming out of Washington could keep the markets going sideways for a while.

For what it's worth, Warren Buffet thinks the Real Estate market will start to rebound in 2011. OK. It's as good a guess as any, if not paricularly original.

Fannie to U.S.: We need another $15.3 billion

NEW YORK (CNNMoney.com) -- Battered by the housing crisis, mortgage finance company Fannie Mae said Friday that it needs another $15.3 billion in bailout money from the federal government.

Fannie Mae (FNM, Fortune 500), which is controlled by the government, reported a fourth-quarter loss of $16.3 billion, including $1.2 billion in dividend payments to the Treasury Department. This is down from $25.2 billion a year earlier and $19.8 billion in the third quarter.

Dividends? Since when does a company distribute profits when it loses money? It does when the Federal government owns it and wants to show phony returns on a losing investment. Then it turns around and gives Fannie more borrowed taxpayer money to alleviate losses partially caused by the dividend payments themselves.

Would this be a crime if a private company did this. Why, yes. Yes it would. This is like having a Ponzi scheme with one investor who has agreed to rip off himself.

Florida's Public Option For Homeowners

A national public option in health insurance would work out in much the same way:

"Unlike private companies, when the government can't cover its costs, it does not go out of business; it just finds ways to tax someone else. So it is for Citizens. Unlike real businesses, Citizens' financial shortfalls are made up by charging "assessments" to all of the remaining homeowners, auto, boat, motorcycle and business insurance policies - including policies of competing private insurance. The bottom line is that well-managed and financially solvent private companies cannot compete against state-sanctioned and subsidized operations.

It means a slow death of the private insurance market, but a painful and costly one for consumers. As Citizens grows and charges the customers of private insurers for its financial misdeeds, more customers leave for Citizens, which pushes private insurers out of the market and increases the market share of Citizens.

It's an endless cycle. It's the public option. But the scheme will soon leave Citizens fewer privately served citizens to level its assessments upon and leave Citizens as the state's high-cost monopoly...More from TBO.com

The notion that government can fairly and efficiently compete with the private sector in any business is as preposterous as allowing a home sports team provide its own referees, change the rules at any time and take points away from the opposition when they fall behind.

After one-year blip, Florida's population to grow again

Florida's population should rebound this year from its first loss in more than half a century, according to new estimates from the University of Florida.

The state is expected to add about 23,000 residents between April 1, 2009, and April 1, 2010, following a loss of almost 57,000 residents the previous year, UF's Bureau of Economic and Business Research reported Tuesday.

They are probably right on this one. As more people find ways to unload their homes and escape overbearing and failing states e.g. New York, Michigan, California - the long term domestic migration trends will continue. The good news for Florida is that most of these people are the productive ones who are fed up with paying the bills for insatiable state governments and their union allies.

Where's housing headed? Follow rents?

Rents and vacancy rates are examined in various ways in order to gauge the overall health of the housing market. This report looks at the ratio of leasing versus ownership costs:

...That brings us to the Deutsche Bank studies. Its REIT research team first established a benchmark for a "normal" ratio of rents to ownership costs -- what it calls ATMP, or after-tax mortgage payment -- for 53 U.S. cities.

On average, DB found that families across America were spending about 87% as much to rent as to own in 1999. Hence, they were traditionally willing to pay a premium as homeowners, though not a big one

But by mid-2006, with the craze in full swing, the figure fell below 60%. At that point, Americans were spending an incredible 66% more to own than to rent. It was far worse in the bubble markets: In Las Vegas, Phoenix and Miami, homeowners were paying twice as much as renters, and in San Francisco and Orange Country, owners' monthly payments were triple those of their neighbors with leases instead of mortgages.

DB reckoned that housing prices are more or less reasonable when the ratio returns to its 1999 level. Why 1999? Because the ratio was relatively stable throughout the 1990s, and it was the year the steep rise in prices began in earnest.. At the end of the third quarter of 2009, the overall number stood at 83%, meaning renting was just a tad more attractive than owning.

In other words, at some point prices will fall and/or rents will rise to a point where it becomes more attractive to own than rent. But there are other variables at work here. Interest rates will almost certainly rise soon and big inflation shocks are inevitable when government spends, borrows and prints money at its current, unsustainable pace. Additionally, there is a shadow inventory of distressed homes that will continue to add to supply in record numbers.

Yes, there is pent-up demand, but there is also a lot of pent-up supply along with much economic uncertainty that our government is only exacerbating. Like any other measure, this one should be just one tool in the box.

Man accused of turning foreclosed homes into rentals

A little knowledge is a dangerous thing:

NEW PORT RICHEY — The homes had been vacated due to foreclosure when Stephen Bybel discovered them.

Authorities say Bybel attempted to seize the properties through an obscure state law, then posted the properties on Craigslist and filled the homes with tenants...But the Pasco County Sheriff's Office says Bybel was simply helping himself, collecting rent on dozens of homes he didn't own or legally control. In January alone, authorities say, Bybel pocketed $16,780 in rent...

...When Bybel found a foreclosure property, authorities said, he posted a notice on the home alerting the owner he would take "adverse possession" of the property unless the owner contacted him in seven days.

The notice cited chapter 95 of Florida Statutes, which spells out how someone can take possession of a property through squatter's rights. The law requires a person occupy the property for at least seven years and fulfill other legal requirements.

Had Bybel or this reporter taken my class, I would have told them the following:

First of all, adverse posession is not an "obscure state law" and it exists in various forms in all fifty states. Without getting too deep in the weeds, the history and purpose of adverse posession goes back centuries and is designed to place a statute of limitations on ownership of disputed property. In other words, a property owner has a certain amount of time to remove a hostile trespasser or they will lose that right.

Florida law not only requires a seven year waiting period, but also requires that the would be possessor pay the property taxes during that time. Among other things, it also says that you have to show evidence of some legitimate claim to the property, whatever that may be.


Nevertheless, you have to admire this guy's inventiveness, if not his stupidity. I'm impressed that he managed to take 71 houses and rented over 30 of them. If anything, this shows just how unmanageable these foreclosures have become.

Stimulus to Spur Home Sales?!

From Realty Times:

"Buyer are still hesitating on whether to enter to market, but the National Association of Realtors estimates "the impact of the stimulus package and lower interest rates on the housing market to be about 900,000 additional home sales in 2009 compared to conditions before the stimulus package."

I know the NAR's mission is to be cheerleaders for the real estate industry, but to say that the Federal Spending Spree aka: Stimulus will have anything but a negative impact on home sales is just plain dishonest. First of all, most of that money wont be spent until 2010 at the earliest. Second, the NAR needs to show specifically where in that spending is anything that can be shown to have a direct positive impact on home sales. Additionally, the unprecedented borrowing and printing of money that is coming will cause rampant inflation and drive up interest rates.

The current historically low interest rates should have already spurred home sales, but the paralyzing negative rhetoric coming out of Washington, along with the promise of higher income and energy taxes is enveloping the market in fear. Did the NAR miss the proposal to limit itemized deductions, especially on mortgage interest?

Having said that, I still believe now is the time to buy and borrow at fixed rates.

Finessing 'Moral Hazard'

You don't "finnesse" immoral policies. You just don't do it.

"...Administration officials say it is impossible to help large groups of borrowers without introducing some degree of what has come to be known as "moral hazard." In other words, in its effort to help homeowners who behaved responsibly but wound up in trouble, the Obama plan will likely help some who didn't, which some say encourages more risky behavior."

Time to Buy: Rent vs. Buy Gap Narrows

This is good news. From The Wall Street Journal:


"Now, after two years of rapid home-price depreciation, the relationship between the cost of rental payments versus after-tax mortgage payments is tilting toward ownership in a number of metropolitan areas.

Over the past 18 years, after-tax mortgage payments have averaged 26% more than rent payments, according to Green Street Advisors, a real-estate consultancy based in Newport Beach, Calif. In 2006, at the height of the housing bubble, mortgage payments reached as high as 66% more than rent payments. But by the end of 2008, average monthly rent for the largest 50 metropolitan areas was $1,045, compared with after-tax mortgage payments of $1,300, assuming a rate of 5.5% on a 30-year fixed mortgage. That means mortgage payments averaged just 24% more than rent payments, the narrowest gap since 2001."

END EXCERPT

This indicator has always been one of the best in predicting a revived housing market. If housing prices fall or rents rise to where the monthly payments are essentially equal, buyers start moving into the market at a much faster pace.

Additionally, interest rates are as low as they are going to get and will probably rise soon when the Fed tries to combat the coming high inflation that will result from the Government's massive spending and borrowing spree.

New housing starts are also at historic lows which means any new demand will reduce current supply and pressure prices upward, or at least stabilize them. New construction takes a long time and any significant increase in supply will lag behind a market revival by a year or two.

There is a window of opportunity here for anyone who is thinking of buying a home. Do it now with as much down payment as possible and get a FIXED RATE mortgage.

A Dishonest and Immoral Housing Policy

The AP offers some factual analysis of Obama's speech, including his lame response to the millions of Americans angry that are paying for the bad decisions of their neighbors:

OBAMA: "We have launched a housing plan that will help responsible families facing the threat of foreclosure lower their monthly payments and refinance their mortgages. It's a plan that won't help speculators or that neighbor down the street who bought a house he could never hope to afford, but it will help millions of Americans who are struggling with declining home values."

THE FACTS: If the administration has come up with a way to ensure money only goes to those who got in honest trouble, it hasn't said so.

Defending the program Tuesday at a Senate hearing, Federal Reserve Chairman Ben Bernanke said it's important to save those who made bad calls, for the greater good. He likened it to calling the fire department to put out a blaze caused by someone smoking in bed.

"I think the smart way to deal with a situation like that is to put out the fire, save him from his own consequences of his own action but then, going forward, enact penalties and set tougher rules about smoking in bed."

Similarly, the head of the Federal Deposit Insurance Corp. suggested this month it's not likely aid will be denied to all homeowners who overstated their income or assets to get a mortgage they couldn't afford.

"I think it's just simply impractical to try to do a forensic analysis of each and every one of these delinquent loans," Sheila Bair told National Public Radio.

END EXCERPT

It's not just impractical, but impossible to determine the circumstances underlying these loans with any degree of certainty. Bernanke's false analogy is typical socialist rhetoric and is misleading at best. This isn't an accident, like smoking in bed. Most of these loans were deliberate attempts to make money through debt the borrowers either knew or should have known they couldn't afford.

The way a free economy should deal with that is to allow those folks to experience the consequences, honest mistake or not. What you don't do is reward that behavior by handing the bill to everyone else.

Had these folks made money from their recklessness as many did during the bubble, would they have shared their gains with the rest of us? Of course not. So once again, like Fannie Mae and Freddie Mac, we have private profit backed by public risk.

The argument that this scheme will stabilize neighborhoods is nonsense and will actually prolong the problem. Many of these borrowers will never be able to pay any loan and will just default again. Additionally, the price drops from foreclosures provide opportunities to buyers now sitting on the sidelines, which will allow the market to work itself out if the fools who got us into this mess in the first place would just leave it alone. That's happening right now in many neighborhoods.

No one can morally justify forcing 92% of homeowners into bailing out the excessive risk taking or just plain foolishness of the other 8%.

And what of the 32% or so of Americans that rent their homes? A lot of them probably had the good sense not to buy homes with risky debt. And this is how we reward them? They have every right to feel screwed.

How about all the folks that have already lost their homes? Are we going to give them a Mulligan and return their homes?

Policies that reward the irresponsible and punish the responsible are never justified, no matter what the short term pain may be. Over the long term, we are encouraging bad behavior and discouraging the good.

Filed: real estate, mortgage, obama

ACORN Defends Its Terrorism

Stuart Varney takes on thug spokesperson Bertha "by any means necessary" Lewis of the criminal organization known as ACORN.

In this case the "homeowner" in question bought a house for $87,000, refinanced it for $270,000 and the defaulted. Where's the money? Who knows? ACORN doesn't care. The shareholders and employees of this bank can go screw themselves along with taxpayers, which means a lot of real people will pay for this fraud three times over.

In other words, ACORN uses the government as its leg breaker to force banks into lending money to people who can't (or won't) pay it back, then resorts to terrorism when the bank wants the collateral the borrower voluntarily agreed to put up.

These people are government (Democrat) supported thieves, plain and simple. They cloak their theft in the name of a warped sense of "justice", which is just another way of saying thay deserve the property of others for free because...well, just because.

Big Problem: $300 Billion Not Spent

Barney Frank, one of the chief architects of the mortgage meltdown has miscalculated again in his attempt to stick taxpayers with an even bigger bill for his incompetence:

WASHINGTON (Reuters) - Back when $300 billion seemed like a lot of money, Rep. Barney Frank pushed through Congress one of the first attempts to rescue the U.S. housing market -- a program that has since fallen far short of its goals.

In July 2008, the Hope for Homeowners Act was approved amid promises it could help 400,000 distressed mortgage borrowers. That was months before the government's $700 billion bank bailout, or a possible $900 billion economic stimulus...

...But as of Monday, only 451 applications had been submitted to the FHA for participation in the program and only 25 loans had been closed under it, said an FHA spokesman."

Gee. Why would that be? Here's some of the basic requirements for participation:

"Hope for Homeowners maintains FHA's long-standing requirement that new loans be based on a family's long-term ability to repay the mortgage. FHA only allows owner-occupants to be eligible for FHA-insured mortgages. Borrowers must also meet the following eligibility criteria:

Their mortgage must have originated on or before January 1, 2008;

Their mortgage debt-to-income must be at least 31 percent;

They cannot afford their current loan;

They did not intentionally miss mortgage payments; and

They do not own second homes.

END

Well, the problem is obvious. The program is only available to responsible borrowers who can actually re-pay the new loans. All the unqualified mortgagors that Frank and his party forced banks to lend to can't compound this disaster by borrowing more money they can't afford.

Don't worry. Frank will figure out a way to waste the money. $300 billion buys a lot of votes.

Homeowners re-defaulting after getting aid

WASHINGTON (Reuters) - Recent data suggests that many borrowers who received help with mortgage modifications earlier this year tended to re-default on their payments, a top U.S. banking regulator said on Monday.

"The results, I confess, were somewhat surprising, and not in a good way," said John Dugan, head of the U.S. Office of the Comptroller of the Currency, in prepared remarks for a U.S. housing forum.

What's surprising is that this government hack is surprised. These are people who never should have had mortgages in the first place but did because the government put a gun to lenders heads. Re-financing these loans just encourages more of the same irresponsible behavior.

These new loans have a default rate of 36%, which is around nine times the average for all mortgages. So the government has just further injured the economy by strong arming banks to again throw good money after bad.

This is the moral hazard that always dooms government-run economies to failure.

WAPO Defends Capitalism?

Imagine my surprise at seeing this in the Washington Post of all places:

...The deregulation of U.S. financial markets did not reflect only the narrow ideology of a particular party or administration. And the problem with the U.S. economy, more than lack of regulation, has been government's failure to control systemic risks that government itself helped to create. We are not witnessing a crisis of the free market but a crisis of distorted markets...More

McCain to Fannie Mae: Go Away

From
The Wall Street Journal:

In the rush to bulldoze the Fannie Mae-Freddie Mac and housing bailout bill
through Congress this week, scant attention has been paid in Washington to how
the U.S. system fell into this hole. Thus it was refreshing to see Senator John
McCain step up and speak rude truth to his colleagues about the fiasco in an
op-ed piece this week.

"Americans should be outraged at the latest sweetheart deal in
Washington," the Republican presidential hopeful wrote in the St. Petersburg Times, stating
the clear but all-too-often unspoken reality about this greatest of
boondoggles...

Senator McCain, who wasn't present for the cloture vote, also called for an
end to their multimillion-dollar lobbying campaign. More importantly, he called
for "making them [Fannie and Freddie] go away," as in, be no more. Receivership
may indeed by the only option if a regulator can't get the far-flung activities
of these two under control.

Even if these quasi-socialist entities are brought under control and stabilized, they should be broken up and completely privatized. These two corporations were created at times when the private secondary market was virtually non-existent. That's no longer the case and their mere existence as private profit, public risk ventures distorts the mortgage market and encourages the type of behavior one would expect when someone else pays the consequences for their bad decisions. Additionally, Fannie and Freddie's operations are heavily influenced by the political considerations of congress that prompt them to adopt imprudent policies no truly private company would ever consider.

Many are saying that without Fanny and Freddie, the mortgage and Real Estate markets would have collapsed had they not been there as a backstop, without considering that private markets would have been more conservative had they not been there in the first place. On a basic level, the Federal Government has no moral or constitutional right to be in the mortgage business in the anyway. This disaster proves that it's high time they got the hell out and take taxpayers off the hook.