An open letter to all of the lawmakers and taxpayers who think a mortgage bailout is what we need to solve the housing crisis…
Watch more related videos:
An open letter to all of the lawmakers and taxpayers who think a mortgage bailout is what we need to solve the housing crisis.
BY PAT SUMMERS
Multiple polls have shown that the majority of people are opposed to a government-led bailout of mortgage borrowers and lenders. Nevertheless, lawmakers go forging ahead, looking for new ways to bail out those irresponsible parties that created all of the problems.
The worst part is that they actually receive support and encouragement from consumer activists, lobbyists and other people who are all too happy to throw innocent taxpayers to the wolves.
This article is a plea to all of those people who think that a mortgage bailout is what is needed by this country right now and to the groups wanting to punish responsible people for their personal gain.
Every time a bailout is mentioned, there is a lot of talk about slowing the decline in prices. Everyone wants to keep the bubble inflated and the good times rolling. But it's time to face facts: home prices are too high and they need to come down.
Home prices in the U.S. increased 85 percent (adjusted for inflation) from 1997 through 2006, according to noted Yale economist and bubble expert Robert Shiller. Income increases were nowhere near this figure. Since mid-2006, home prices have fallen just 15 percent, leaving many potential buyers still priced out of the market.
Incomes are not going up. They are going down. In order for people to be able to afford to buy homes, prices need to come down too. It's simple math. A bailout won't change that. In fact, it could make maatters worse by delaying the inevitable correction.
Bailout supporters argue that a bailout is needed to 'keep people in their homes.' Let's think about this for a minute. What's the point of keeping someone chained to a depreciating asset, one they really can't afford?
Data has shown that people aren't defaulting in increasing numbers because of readjusting payments. Most of the defaults occur before a reset. The fact is, that hundreds of thousands--if not millions--of people bought more house than they could afford because home prices were too high.
Giving these people a prime instead of subprime rate or fixed instead of adjustable rate isn't going to change that fact. These homeowners would be much better off getting rid of the dead weight ASAP and renting comparable homes for less money for the next few years.
A mortgage bailout that utilizes taxpayer money or any other funds that would be better spent elsewhere is just plain unethical. While there are people struggling with default because of job loss, ill health or some other tragedy, most homeowners in trouble are that way because they made poor financial decisions.
Bailing them out at the expense of others is clearly wrong. Poor financial decisions get made every day. People overspend on their credit cards, they gamble away their grocery money at the slots, they buy brand new SUVs when they should have bought used Chevettes and they spend their daycare funds on crack. Do we bail these people out? Of course not.
The same philosophy should be applied to housing. While it's true that not everyone was a speculator--some people just wanted homes for their families--they all had the chance to weigh their decisions and READ the contracts they were signing. If poor decisions were made, it shouldn't come as a surprise that there are consequences to be faced.
By the way, this 'consequence theory' also applies to all of the builders, lenders and others in the housing industry who made bad business decisions. They are the last people who should be helped by a bailout.
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.
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.
Are you considering a new home loan? One type of new home loan is a balloon mortgage, which allows homeowners to make lower mortgage payments. Read this article to learn if a balloon mortgage home loan fits your financial needs.
Do you know where your credit stands? Knowing your credit standing can help you be better prepared when you meet a lender to discuss your home loan application. Read this article to learn how you can prevent being rejected by a lender.
The 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?