2 ms·

So then the taxpayer gets screwed?

• to11mtm 4y ago
  Sometimes. In the case of FHA loans (which are the ones that taxpayers would be considered 'most on the hook for'), there has been a lot of reform around trying to avoid that scenario. Lenders get audited on underwriting more strictly than before. If it turns out a loan didn't meet guidelines, the lander may have to buy the loan back and/or pay penalties. Also, FHA's Mortgage insurance fund is in a much better spot thanks to rule changes around MIP (FHA's equivalent to Conventional PMI.) Last report I think they had 1.2T to cover losses in value with that fund. That's about 10% of -all- household debt in the country.