Will Homeowners Who Default Need To Have A Plan?
Feb 19, 2009 Political
Or for that matter, will Congress?
The big three auto makers went to Capitol Hill last year and begged for money. They were excoriated for using corporate jets to get to the meeting by people in Congress who use military jets to get around the world on the taxpayer dime. Nancy Pelosi is in Europe this week and she went there in an Air Force plane. She also took her family with her. I wonder who paid for that?
Congress spread a little money around and told the automakers that they needed to come back with a detailed plan that clearly laid out how they were going to conduct business. Congress wanted to ensure the companies had a methodology that would make them profitable and enable them to pay back the money. We can’t have these big shot executives spending money when they are going bankrupt. We can’t have them using hard earned tax dollars on half baked schemes. No, they need detailed plans that Congress can scrutinize.
It is an interesting concept and one worth exploring. Before I start, I was not and am not in favor of a bailout for the auto industry (or any other industry). I think that the market should sort it out and if a business goes under than another will come along to take its place. It is survival of the fittest. For a group of people who believes in evolution, this concept seems to escape their grasp.
Why is it that Congress is not placed on a plan? How is it they are able to spend over a TRILLION dollars in a spending bill that they did not read on things that will not stimulate? How is it that we are 10 TRILLION dollars in debt and they can still spend a TRILLION more as if it were nothing? Congress should have to submit a plan to the American people that clearly outlines how they intend to cut back. They should have to show how they are going to become responsible with our money just like the auto makers. I know Obama said he would go through the budget line by line but that was a lie in the ranks of “Its only a cold sore.”
He has not gone through the budget line by line. He has not looked at different government agencies to see which can be closed or downsized. He did not even go through the bill he signed line by line. He could not have considering all the other things he was doing while it sat on his desk (figuratively speaking).
Today though, Obama was in campaign mode once again. He prefers that because he is pretty good at it. We have seen him try the leadership thing over the past 4 weeks and he sucked at that. He got his head handed to him until he started campaigning again. He could not lead a group of people out of a burning building.
Unless you include his followers who blindly follow him like rats behind the Pied Piper.
In his campaign stop today Obama introduced his plan to reward irresponsible people. Obama unveiled his $275 BILLION dollar plan to assist people with their home loans. Obama will increase funding to Fannie Mae and Freddie Mac so they can lend money. That is what got us into this mess. At least some of his friends can get rich working there. Fannie and Freddie went from nearly $70 a share to 70 cents a share and their reckless actions helped fuel the collapse.
In addition, Obama will use the money of responsible taxpayers, the ones who pay their bills, and work to get the mortgages reduced in both principle and interest rate. Yes, Obama wants to readjust the principle people paid for their homes (lower the cost) and he wants to have banks refinance them at a much lower rate. It seems to me that the loan taken out on homes is a contract and both parties are obligated to live up to the agreement. That means if a person agreed to buy a house for a certain price then he is obligated to pay that price. The government does not belong involved.
If people bought homes that they could not afford then they need to suffer the consequences. If the government steps in and helps them out then the bad behavior is reinforced. You get more of what you subsidize and if the government starts reworking bad loans there will be even more of them. People will not learn and they will continue to do the same stupid things. What about those of us who pay our bills on time? What about those of us who did not buy more house than we could afford? We will have to pay the amount we agreed to pay and at the interest rate that was also agreed upon, as well we should. Everyone should have to pay what they agreed or they should sell their houses or have foreclosure take place. Too bad, so sad, sucks to be you. Why should the rest of us pay for YOUR mistakes?
What I want to know is what kind of plan do homeowners have to come up with? I mean, the auto makers had to make a plan to show they would be responsible and do better financially before they can get federal money. What do people who are helped with taxpayer money for their home mortgages have to do that is equal to what car makers have to do?
I think they should have to present a plan that details how they will ensure they will not get behind again and how they will not overspend or enter into foolish contracts again. The plan should include giving up cell phones, cable TV, FIOS, or Satellite. They should be forbidden from eating out at any restaurant including fast food joints. They should have to give up tobacco and alcohol and submit to random urine tests for nicotine and alcohol as well as any other drugs. Anything found should lead to serious consequences.
These people should also have to sell anything that is a luxury. If they have more than one TV or computer then the extra ones need to go. No iPods, no cell phones, and no PDAs. They should also have to sell any vehicle that is elaborate and get a small, low cost, fuel efficient model. It should also be required that they buy US savings bonds or some other investment vehicle so they can save for their future. Bonds are ideal because the money goes to the government and because they must be held for a certain amount of time and they have long maturity dates.
I am not trying to be a hard ass or anything but if I am going to be footing part of this bill then I am becoming a part owner in their homes so I get a say in how they live (as do all other taxpayers). They can take their own decisions when they pay their own bills.
This deal should also require recipients to give up any other government benefit with regard to taxes. They should lose the Earned Income Credit and any other similar deduction. They will be getting enough help from taxpayers so they should get no more.
There can be many more conditions to receive this mortgage assistance and I encourage people to list their ideas in the comments section.
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Clinton and Bush in Joint Mortgage Plan
Dec 6, 2007 Political
There are about 1.8 million people who received foreclosure notices this year on homes they had no business buying. The people were attracted to buy homes that were too much for their budgets by lenders who offered no down payment loans and adjustable rate mortgages. The promise of future wealth from escalating home values was too much for some who bought into the lower rates never taking the time to consider what would happen if the market went south. The sub prime market is now rearing its ugly head as many more Americans will face foreclosure in the coming years.
But wait, George Bush and Hillary Clinton are riding to the rescue. The President put forth a plan today which was in the works when Clinton touted the very same ideas. Despite her claim that her plan is better and helps people in ways that the Bush plan does not, the fact is they are nearly identical and they are potential disasters for the economy. The government has no business getting involved in the affairs of private companies and the people with whom they have entered contracts. This is a matter that can and should be worked out between the parties in the contracts.
Bush and Clinton claim that no taxpayer money is involved but the plan offers financial counseling to people so the money to pay for that has to come from somewhere. Also, some people will be able to move into loans secured by the FHA which means that if they default, the taxpayer will get socked. This is an ill advised plan that is designed to help people who made poor decisions and there are no guarantees that this will not hurt the taxpayer. For instance, once the loan rates are frozen, one option under the plan, what procedures are in place to ensure that homeowners do not borrow against the equity in the house? People with financial problems (and anyone who opts into this has financial problems) are easily influenced to take out home equity loans to pay the bills. Those loans are secured with the home which, in some cases, will be secured with taxpayer money.
Sometimes people make bad choices and the unfortunate fact of life is that they must suffer the consequences of those choices. When people spend more than they can afford buying a car or racking up credit card debt there is no expectation that the federal government will swoop in to bail them out. Why then, do people expect the federal government to bail out those who got in over their heads when they purchased a house? There are solutions that can involve the government.
First, they can make some kind of uniform rules governing the sale of homes. I have bought two homes in my lifetime and the amount of paper and the number of times that one has to sign is staggering. I have read every item that I was signing and asked for clarification for anything I did not understand. I also understand that, as the song says, what goes up must come down. People should have some understanding that the cost of homes go up and down and that great markets do not last forever. They should also understand that an adjustable rate can adjust in both directions. The government can help by forcing mortgage companies to make the language on forms clearer and easier to understand.
Additionally, there should be some disclosure about how adjustable rates work and how increases can affect payments. Since home sales that require no down payment cause havoc and gain little equity, people should not be allowed to purchase homes under these terms unless credit history and financial statements show that the purchaser is able to absorb increases in interest rates.
These items will help people with future home purchases but what about those who are already in trouble? Mortgage companies should work this out without government intervention. The most reasonable thing would be for the companies to offer a fixed rate refinance at a reasonable cost. The cost could be included in the new loan so those with little cash on hand could refinance and have a fixed monthly rate upon which to plan.
In some cases, people are going to have to shop around and try to get a fixed rate mortgage and it might cost them money. This is the cost of making a bad business deal. If all else fails they could negotiate with the mortgage company for relief until they can sell the home and get something that they can afford.
Regardless of which path people take it should not be one lined with assistance from the government. There are too many problems associated with government intervention and the unintended consequences could be worse for the economy, the homeowners, and the mortgage companies.
If all else fails and people lose their homes, I understand the government has a bunch of trailers in New Orleans that are not being used. Also, Hillary’s involvement gives her opponents more proof that she is not very different from George Bush after all.
Source:
WBAL
Tags: george bush, Hillary Clinton, mortgage, poor choices, sub prime