.may claim that these programs are for struggling mortgage borrowers, it's obvious that their real goal is to bail out the mortgage lenders…
.may claim that these programs are for struggling mortgage borrowers, it's obvious that their real goal is to bail out the mortgage lenders…
Watch more related videos:
View Housing Market Watch RSS feedThe U.S. government is working to develop a few different programs that are meant to stave off foreclosures. Policymakers may claim that these programs are for struggling mortgage borrowers, it's obvious that their real goal is to bail out the mortgage lenders. The question is: do reckless lenders really deserve to be rescued?
By Pat Summers
In a recent article I explained why reckless mortgage borrowers do not deserve to be rescued, but I think it is important to touch on why the reckless mortgage lenders don't deserve to be rescued either.
Because, let's face it--that's who the bailouts are really for.
President Bush and Congress can't come right out and say that, so they speak of all the struggling borrowers, tugging on heart strings in order to confuse the issue. To seal this deal, they look straight into the camera and say they don't want to bailout mortgage lenders.
The reason they mention this is because everyone knows that it is the mortgage lenders who hold much of the blame for this debacle. Mortgage lenders were the ones who made loans they knew borrowers couldn't repay just to make a quick buck.
That's not to say that lenders are the only ones at fault; they needed stupid and/or greedy borrowers and politicians who were willing to look the other way in order for their scheme to work. But it was the lenders who initiated this madness.
During the housing boom, the really reckless mortgage lenders seemed willing to lend money to anyone who was actually breathing. Unlike in the old days, borrowers didn't have to prove that they could afford the house or that they had the means to pay on a monthly basis. Heck, they didn't even have to prove they were employed.
Lenders were willing to loosen the regulations for several reasons. First of all, home prices were rising quickly. If borrowers defaulted, it should be easy to foreclose and sell the homes for a profit. Second, all of a sudden it became ridiculously simple to pass the risk off to others by bundling the loan with several others and selling the whole batch to securities investors.
It's also worth mentioning that there were all kinds of new mortgage products created just to make it easier for borrowers to purchase high-priced homes that weren't attainable for them with traditional fixed-rate mortgages.
Lenders were living large, at least until the bottom fell out of this scheme. Home prices started to fall instead of continuing to rise as anticipated. Interest rates also started to rise, eroding the value of outstanding mortgages.
Borrowers began to default in increasing numbers. Most lenders weren't surprised--remember they willingly and knowingly loaned money to people who couldn't afford it. The real trouble began when some investors started to demand that lenders take back their more worthless loans. This is why many lenders went bust (some 212 since late 2006) and others have written down billions of dollars in home loans.
Lenders were given rope enough to hang themselves with and that is just what they did. Now the government is stepping in in order to hide just how insolvent the U.S. banks really are.
The Fed has directly bailed out predatory lenders using billions of dollars seemingly pulled out of thin air. Bush initiated a teaser freezer and now wants to utilize taxpayer-guaranteed loans in order to ensure that lenders don't have to buy back any more worthless paper.
There are many other proposals in the works. Each one is different, but the goals are ultimately the same: transfer accountability and risk away from mortgage lenders.
Mortgage lenders and builders made millions of dollars worth of contributions to various political campaigns. That's why it was easy for them to persuade politicians to look the other way while the boom was on and why it has been easy for them to convince the government to help afterwards.
If politicians want to bail out the monsters they helped create, well, more power to them. But they should bail them out with their own money--not with taxpayer-guaranteed programs.
I am not at fault for their shallow display of greed and neither are other 99 percent of people who will be paying the bill generated by reckless lenders. These lenders knew exactly what they were doing wrong, and they should be held accountable for their actions.
If politicians can't do that, then taxpayers should. Taxpayers are the ones who really stand to lose from this mess. They are the ones who will bear the burden while sleazy business people profit.
Some politicians are in favor of providing assistance to the millions of homeowners who are facing default as a result of poor decision-making and falling home prices. Others are dead set against it. Let's see where the American people stand.
An open letter to all of the lawmakers and taxpayers who think a mortgage bailout is what we need to solve the housing crisis.
To get borrowers to leave a house--and leave it in good condition--mortgage lenders around the nation have begun offering cash for keys. Some lenders are paying out upwards of $3,000.
Democrats unveiled a new plan last week that will allow the FHA to buy $300 billion in delinquent, underwater mortgages. The initial cost to taxpayers is estimated to be $20 billion.
The worst housing slump since the Great Depression is prompting all manner of new bailout plans. Fed Chairman Ben Bernanke encourages banks to forgive portions of mortgage debt, the Democrats propose using billions in federal dollars on buying up bad loans, and the Bush Administration is prepared to dump bank losses on the taxpayers' shoulders.
Should mortgage borrowers at risk of losing their home be given a bailout? What about lenders who face lost profits? Four recent polls ask Americans where they stand on these issues.
Many people may be losing their homes to foreclosure because of legitimate financial crises, but there are even more people losing their homes because of lender follies as well as their own greed and stupidity. Here are five stories in particular that will be sure to induce fits of eye-rolling.
If you have followed the news at all over the last few months, then you know that the public has been spoon fed a spate of tearjerker news stories that are meant to paint struggling mortgage borrowers as victims. These stories talk about the importance of staving off foreclosures and helping people who need it, but they very rarely touch on the truth of the matter: most mortgage borrowers were reckless and do not deserved to be rescued.
Are you familiar with home loan terminology like adjustable rate, credit score and interest-only? Knowing this home loan jargon can help you become a savvy home buyer and allow you to better understand a realtor or lender. Read this article for explanations of these home loan terms.
Did you know that you could be required by a lender to have private mortgage insurance (PMI) as part of the terms of your home loan? Private mortgage insurance can raise a homeowner's monthly payments. Read this article to learn the details about private mortgage insurance.
Are you looking for a straightforward explanation of mortgage terms? Do you want to know how your money is being divided into principal, interest and fees? Read this article to learn more about these sections of a home loan.
For many first-time homeowners, the excitement of purchasing a home may distract them from examining every detail of their home loan and one detail that many first-time homeowners overlook is the prepayment penalty. Read this article to learn how this penalty can affect the refinancing or selling of your home later on.