Yesterday we noted how the housing bill’s creation of a National Housing Trust Fund that would funnel money to corrupt and partisan groups such as ACORN (Association of Community Organizations for Reform Now) was reason enough to be skeptical of the bill. Today the New York Times reports that ACORN is one of two prominent national nonprofit groups that “are reeling from public disclosures that large sums of money were misappropriated in unrelated incidents by an employee and a former employee.” Sounds like business as usual at ACORN.

But more importantly for the housing debate, the Washington Post reports that he nation’s top housing official, HUD Secretary Steve Preston, says the bailout will end up saddling tax payers with “preventable and foreseeable losses” unless the policy is significantly changed. The Post explains:

The legislation, passed by the House and pending in the Senate, would allow distressed borrowers to trade mortgages with rising payments for more affordable FHA loans if their lenders forgive a portion of the debt.

If enacted, the FHA would take on riskier loans than it is used to, which could financially overwhelm the agency if safeguards are not in place, said Preston, who has been secretary for a month.

[T]he House bill does include a provision that would continue to allow popular seller-funded down-payment assistance programs, which make up about a third of FHA loans. In those programs, home sellers give money to a charity, which then helps buyers make down payments.

For years, the FHA has tried to eliminate these programs, without success. Now it is attempting once more to write rules that would ban this funding. But those rules would be moot if the House provision survives, creating unprecedented financial problems for the agency, argued Preston.

Because of the poor performance of seller-funded down-payment loans, the FHA may ask for $1.4 billion in appropriations for the fiscal year beginning Oct. 1 — the first such appropriation in its history.