Las Vegas is choc-a-bloc with unsold houses and foreclosed unit. But new homes are coming up – it is visible for all to see. Similar activities are taking place in some of the worst foreclosure hit regions of Florida, California (inland regions) and Phoenix.

Las Vegas is referred to as the foreclosure capital of the country with 10,000 new properties standing empty and many thousands of old ones slipping into foreclosure each month. It seems builders are now gambling on new constructions without outside help. They should be wished well.

However the funds are not entirely from their own pockets. It is the taxpayers who are shouldering the risk – as they did during the housing bubble days. These builders have taken government insured mortgages.

It is imperative that further misuse of public funds should be stopped. It was an unpleasant surprise to learn that Federal Housing Administration continues to guarantee loans that required down payment of only 3.5% in a housing market like that of Las Vegas that has been flattened out.

In exchange for this meagre down payment FHA assists the developers to offload houses to buyers who are struggling in their search for shelter. Apparently both sides are happy, the sellers and the buyers but who is taking on the risk if the loans turn sour? It is Joe down the road. Who else?
The price of residential units in Las Vegas has already tumbled by 60% from the booming days of 2006. If so why is it not possible for potential buyers to scramble up the 20% down payment required for conventional loans? Perhaps the reason is that they have exhausted all their resources and do not have even an extra cent. Without the help of Washington they cannot clinch the deal.

Fannie Mae and Freddie Mac are continuing to finance or give support to residential house mortgages. In 2009 of the entire mortgages 70% originated from these two giants. They purchase the mortgages from the lenders and bundle these into securities bearing the stamp of guarantees being given by the taxpayer.
There is a scandal linked with the names of these two. Fannie and Freddie were private firms also trying to squeeze the best profits from the market. The result was pure sleaze. The top brass stuffed their pockets gorging on the sub-prime, leaving the taxpayer high and dry. Since then Fannie Mae and Freddie Mac have been nationalized. To meet their lapses from 2008 till 2020 the taxpayers will have to cough up $380 billion as per the analysis of Congressional Budget Office.

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