Posted by Joseph Y. Calhoun, III

Are we just creating another real estate problem? After all the problems traced to Fannie Mae and Freddie Mac, you’d think we would learn the lesson and stop subsidizing housing. And you’d be wrong:

Much to their dismay, Americans learned last year that they “owned” Fannie Mae and Freddie Mac. Well, meet their cousin, Ginnie Mae or the Government National Mortgage Association, which will soon join them as a trillion-dollar packager of subprime mortgages. Taxpayers own Ginnie too.

Only last week, Ginnie announced that it issued a monthly record of $43 billion in mortgage-backed securities in June. Ginnie Mae President Joseph Murin sounded almost giddy as he cheered this “phenomenal growth.” Ginnie Mae’s mortgage exposure is expected to top $1 trillion by the end of next year—or far more than double the dollar amount of 2007. (See the nearby table.) Earlier this summer, Reuters quoted Anthony Medici of the Housing Department’s Inspector General’s office as saying, “Who would have predicted that Ginnie Mae and Fannie Mae would have swapped positions” in loan volume?

Ginnie’s mission is to bundle, guarantee and then sell mortgages insured by the Federal Housing Administration, which is Uncle Sam’s home mortgage shop. Ginnie’s growth is a by-product of the FHA’s spectacular growth. The FHA now insures $560 billion of mortgages—quadruple the amount in 2006. Among the FHA, Ginnie, Fannie and Freddie, nearly nine of every 10 new mortgages in America now carry a federal taxpayer guarantee.

Herein lies the problem. The FHA’s standard insurance program today is notoriously lax. It backs low downpayment loans, to buyers who often have below-average to poor credit ratings, and with almost no oversight to protect against fraud. Sound familiar? This is called subprime lending—the same financial roulette that busted Fannie, Freddie and large mortgage houses like Countrywide Financial.

And the $8000 first time home buyer’s credit means that a lot of these first time buyers have little of their own money on the line:

NEW YORK (Reuters) - Samantha Kielar is scrambling to find a house in Colorado before the doors slam shut on an $8,000 first-time buyer’s tax credit she needs for her downpayment or home repairs.

The clock is ticking fast. Qualified borrowers need to have house offers accepted by the end of September to assure lenders enough time to beat the November 30 federal deadline to close deals, industry executives said.

“I am willing to settle for something” to finish buying quickly, said 20-year old Kielar, who works at the Denver County Jail, and is a part-time student. The tax credit carrot “is speeding up the process,” she said, adding that “$8,000 could help remodel the house, redo carpets and cabinets.”

For loans backed by the Federal Housing Administration (FHA), which require a minimum 3.5 percent downpayment, the $8,000 can be also be applied upfront toward the purchase rather than later on tax returns like other mortgages.

Have we learned absolutely nothing? What happens to the housing market when the tax credits run out in November? The National Association of Realtors is in full court press mode trying to get the credit extended, but how long are we supposed to do this? What happens when the Fed stops buying mortgages on the open market? How long will we rob one set of taxpayers to benefit another? This isn’t economic policy, this is absolute insanity. I have some advice for those young first time home buyers rushing around like headless chickens trying to buy a house before the deadline - just say no.