Where is This Money Coming From?

HUD issued a letter informing lenders hat they will be reimbursed for "fixing" underwater mortgages.

The letter states:

In an effort to help responsible homeowners who owe more on their mortgage than the value of their property, the U.S. Department of Housing and Urban Development today provided details on the adjustment to its refinance program which was announced earlier this year that will enable lenders to provide additional refinancing options to homeowners who owe more than their home is worth. Starting September 7, 2010, the Federal Housing Administration (FHA) will offer certain 'underwater' non-FHA borrowers who are current on their existing mortgage and whose lenders agree to write off at least ten percent of the unpaid principal balance of the first mortgage, the opportunity to qualify for a new FHA-insured mortgage....

To be eligible for a new loan, the homeowner must owe more on their mortgage than their home is worth and be current on their existing mortgage. The homeowner must qualify for the new loan under standard FHA underwriting requirements and have a credit score equal to or greater than 500. The property must be the homeowner's primary residence. And the borrower's existing first lien holder must agree to write off at least 10% of their unpaid principal balance, bringing that borrower's combined loan-to-value ratio to no greater than 115%.

The details are in an FHA Mortgage Letter also released yesterday. Friday afternoons in August is a great time to bury a lot of stinking corpses. No one is watching.

Now this will cost billions, billions we do not have. In 1987 I bought a condo in NH and within weeks it was 40% underwater, the market collapse of 1987. But I bought it knowing I could pay for it, and despite the fact that it was underwater until 2004 I never bemoaned the fact. In fact I paid off the mortgage in toto. So what is so different now. One would assume that the buyers paid a price they could afford. If not, too bad. Why should the rest of us take on their burden. How stupid is this administration. And Friday in August! Shame!