A New York Times story claims that while politicians are getting a lot of media play with claims that homeowners in financial trouble will be rescued by the Federal Housing Administration (FHA), the agency itself may not be capable of that feat. FHA has been successful largely due to the fact that buyers are required to purchase insurance and until now the premiums were always sufficient to cover losses triggered by defaults.

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Who’s willing to step up? A story from today’s Los Angeles Times got me wondering. The article looked at America’s history of providing financial bailouts and its efforts to get relief to those who “deserved” it while leaving the “undeserving” to twist in the wind. However in most cases the net was cast wide enough that many managed to game the system and get a break they didn’t need or deserve.  So while it’s popular to sympathize with those in default on their homes, is anyone really willing to step up and pay the piper? Apparently those who made poor real estate investments or spent their money on trips and expensive cars have no problem asking their neighbors and fellow taxpayers to absorb the consequences of their decisions. But what are the neighbors to do? Let the foreclosure signs blight the neighborhood and make things worse? Sometimes it comes down to expedience and pragmatism rather than staking out some kind of moral high ground. Or, as US Representative Barney Frank claims, “I want to help the least undeserving people around.”

Hi, I’m Liz Freeman, and I approve this message. I’ll be doing the daily pick from here on out and what I read this morning just made me want to toss my cookies. It was actually a whole collection of wimpy columns suggesting that the worst thing that can happen to homeowners is to be “under water” or “upside down” on their mortgages. Now, why is that so? It’s not great for your lender if you’re upside down, but why should that bother you? Think about it — if you find yourself unable to make a mortgage payment for whatever reason (hopefully a good one), do you want to be the homeowner with a couple hundred thousand in equity or the one with nothing to lose? Who is the bank going to foreclose on? Who is the bank going to work with, perhaps offering more generous terms to make the mortgage more affordable? This is truly a case in which good guys do not finish first; trading as much home equity as you can for cash transfers risk from you to your lender and may put you in a more powerful position when you need it the most

In a mixed week of news, perhaps the most important outcome is that mortgage rates remained at attractive levels:

• Fed Chairman Ben Bernanke conceded there was a possibility that the economy was in recession
• A provision to give bankruptcy judges more latitude to ease mortgage terms appeared headed for defeat
• Housing sales posted a rare rise, even as prices continued to fall
• 30-year mortgage rates remained little changed for the second week in a row

As much as the above might seem a mix of good news and bad news, overall it translates to a decent environment for home and mortgage shoppers.

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HUD Secretary Alphonso Jackson announced his resignation March 31 in the wake of investigations concerning allegations of favoritism after he paid a friend $362,000 to serve as a construction manager in New Orleans. Jackson is also being sued by the Philadelphia Housing Authority due to his alleged interference in a land deal.

The Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) can potentially provide relief to borrowers facing foreclosure as part of the mortgage mess. We wonder if his successor will focus on helping the nation’s families who’ve been victimized by shoddy lending practices, and unchecked greed.