Will Homeowners Who Default Need To Have A Plan?

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.

Big Dog

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9 Responses to “Will Homeowners Who Default Need To Have A Plan?”

  1. Adam says:

    “I know Obama said he would go through the budget line by line…”

    He’s so far into his term and he hasn’t done much or accomplished anything! What is he waiting for? Why hasn’t he cut waste, balanced the budget, fixed social security, ended partisan rancor, cure the deficit, or got us out of the recession? He’s been president 1 month already! I guess all that campaign talk was just empty rhetoric…

    “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.”

    Bottom line here is that if any single tax payer was getting the amount of money we’ll give a single piece of crap corporation in the auto bailout then maybe a plan and a cutback on luxury items would be in order for these folks. Since it’s not you’re whole little comparison kind of falls apart.

    • Big Dog says:

      He certainly made it sound as if he were going to do it quickly. However, seems one would cut the budget before spending money we don’t have.

      As for the mortgages and the auto makers, I made it clear I was dead set against bailing out the auto makers (much to the displeasure of your hero Michael Moron). However, GM had 200 billion in revenue and asked for about 30 billion. That is 6.6%.

      The plan I heard for mortgages called for a 25% reduction in the loan amount and a lowered interest rate. That means a family gets 25% benefit (as opposed to 6.6%). Let us assume that their net worth is twice the cost of the home. That still means 12.5% which is nealry twice what GM is asking for.

      It is easy to discuss it in raw dollars and make it look bad but when we start discussing percentage of worth or revenue then it is a different story.

      The bottom line is Obama wants to reward people for being foolish and buying things they could not afford.

      • Adam says:

        If you want to discuss it in percentages let’s discuss what % of our GDP individual home owners may get their mortgage reduced to versus what % of our GDP we’re giving individual auto corporations.

        The bottom line is not about rewards. The government is not lining up to reward irresponsible people and that’s absurd to act like it’s so. The Obama administration just thinks that taking the pressure off of some folks with mortgages to stem the tide of foreclosures is what will help the nation as a whole get back a strong credit system.

        It’s not so much about “rewarding” people for bad mistakes it’s about protecting other people against those bad mistakes.

        • Big Dog says:

          Click your heels together and keep repeating that and maybe it will come true.

          As for GDP, the bailout for mortgages is reported to be between 75 and 275 billion depending upon what you read. The auto companies combined are looking for less than 75 billion. It would appear as if the the total is more.

          Now, you said individual but that is misleading because it is comparing two unlike entities, individuals to individual companies. If we divide the auto maker money among its employees then we can discuss individuals. In that case, the mortgages are still the biggest recipients.

          This is from an article in the DC Examiner:

          Looking at the troubled home loans that were refinanced last year — often with government encouragement or direct help — the Journal found that even with more favorable terms, people still wouldn’t or couldn’t make the payments. [emphasis mine]

          So how will it help?

          When you reward people for success you get more success. When you reward people for failure you get more failure.

          That is just a truth that has been demonstrated time and again…

  2. Barbara says:

    Maybe the plane will break down in one these foreign countries Obama is going to and they will keep him there. Oh well, wishful thinking.

  3. Schatzee says:

    How about lowering the principal for those of us who pay our mortgages on time and as contracted? I mean this whole mess has caused many home values to decrease anyway – wouldn’t it be FAIR to do this across the board and say everyone’s mortgage is lowered by 25% rather than just the ones who are not paying their bills?

    If not I think that certain restrictions being placed on those receiving the assistance is more than fair. I mean we should all be considered shareholders in those companies and families we are assisting and any decision made should be put to a vote. Wonder how that would go over. LOL

  4. Randy says:

    Schatzee, I think you make a fair and valid point. While I agree that many of the foreclosures we are seeing today are due to people being irresponsible, it is also largely due to banks misleading customers into loans by intentionally not informing them of some of the risks involved. A bank has a fiduciary responsibility to disclose such risks, but didn’t fearing that a potential borrower wouldn’t accept a loan if they were made aware of such risks, and the bank (or the loan officer) wouldn’t make money. There is also the issue that many were making their mortgage payments in full and on time until they were laid off due to this financial crisis. It’s a very complicated issue. It does seem that it amounts to punishing folks that have been paying their mortgages if they aren’t included somehow in the proposed mortgage bailout. However, the thing really hasn’t started to take shape yet.

  5. Randy says:

    I’d like to add, now that I have heard more discussion on the plan, that it sounds like the people making the biggest sacrifice in the housing plan would be those who have already lost their homes, those who don’t own homes, and those few who paid off their mortgages long ago. My understanding is that what is being proposed is an opportunity to renegotiate mortgages to better reflect the deflated market value of homes. I think in a normal market if the value of an investment decreases that is part of the risk of making an investment. Most people that have been paying their mortgages on time are paying on the inflated value of their homes. They are still losing a great deal of money. I haven’t heard anyone say to this point that people would be disqualified from being able to renegotiate their mortgages based on their having made all their payments on time.

  6. Big Dog says:

    People have always had the opportunity to renegotiate. How successful they will be is another matter.

    A car depreciates in value when you drive it off the lot but you are still required to pay what you agreed to pay.

    I think it is wrong to allow a person to renegotiate the price of a home or anything else. You agreed to pay a certain amount of money. The person you bought the house from will not have to pay back the amount he got but the bank will take a hit on the amount they loaned.

    You are right, it is a risk you take. Suppose, for the sake of argument, that people renegotiate and the value is lowered. Then in two years the housing market picks way up and their homes are worth way more than even the original amount they bought them for. Would it then be OK for the bank to force people to take out a new loan on the increased value? That is the opposite of what they want to do now…

    People can renegotiate all they want but when taxpayer money becomes involved then there is a problem. If I have a stake in their houses then I want some say in how they live.

    See, those who are not in distress will not be covered…