Sen. Rand Paul, the newly installed 'Tea Party' senator from Kentucky, wants to eliminate the Department of Housing and Urban Development (HUD), saying the agency played a key role in the housing crisis by implementing policies that "expanded risky mortgages," including subprime loans.

According to the Republican, if HUD (which includes FHA) is eliminated, the government would save $53 billion a year. FHA presently guarantees 30% of all mortgages funded today.

He blames HUD for pressuring Fannie Mae and Freddie Mac to finance an ever increasing share of mortgages to families that earned less than an area's median income. "However, the agency neglected to examine whether borrowers could make the payments on the loans that Fannie and Freddie classified as affordable. From 2004 to 2006, the two GSEs purchased $434 billion in securities backed by subprime loans, creating a market for more lending of the same type."

His call to eliminate HUD and other federal programs is contained in a bill introduced earlier in the week. His goal is to immediately trim $500 billion from the federal budget.

Although the Senator is no fan of HUD and FHA, he would transfer VA housing insurance programs over to the Department of Veterans Affairs. He also attacks the low income housing tax credit and public housing in general.

Mortgage lobbyists believe that Sen. Paul's bill has zero chance of passing.

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