“Flippers” is a term that became synonymous with the housing bubble.  During the overheated market that was mainly caused by artificially low interest rates set by the Federal Reserve, investors often purchased homes and within a few months sold them at higher prices.  This speculating accelerated the increase in housing values until the bubble burst, when the excess inventory of houses accelerated the downturn.

The FHA (Federal Housing Administration) is the government arm that insures many of today’s mortgages.  It was created to help make home mortgages more affordable, part of the government’s plan to promote homeownership for Americans.  The FHA previously determined that flippers did not fit in this mission and would not insure mortgages for houses resold within 90 days.  However, the FHA waived this rule in early 2010 in an effort to prop up the housing market.  This waiver was set to expire this month, but has since been extended by the FHA.

The FHA’s meddling has not stopped the downward spiral of housing prices.  However, that has also not stopped Acting Federal Housing Administration Commissioner Carol Galante from claiming: “This extension is intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight.”  Typical of governmental bureaucrats; when a program fails, just do it again.

Almost every time the government intervenes in the market it has promised positive results that have not materialized.  In the housing market it has made over three years of massive interventions that failed.  In addition, these interventions are creating unintended consequences that will cause even more serious issues in the future.  It remains to be seen how long the American people will continue to allow these failed policies to be repeated by the knuckleheads in Washington.