A Columnist Who Gets It
Washington Post columnist Robert J. Samuelson sees through the politically motivated bailout plans for “distressed” homeowners. In a piece written this week, he notes that the top bailout proposal from Rep. Barney Frank (D-Mass.) would target the irresponsible:
Under it, homeowners who borrowed from Jan. 1, 2005, to July 1, 2007, would be eligible for new loans if their monthly payments of interest and principal exceeded 40 percent of their income, well above a more prudent level of 30 percent.
Under the plan, those new federally backed loans would include not only lower interest rates, but reductions in the amount of money owed.
About 50 million homeowners have mortgages. Who wouldn’t like the government to cut their monthly payments by 20 or 30 percent? But Frank’s plan reserves that privilege for an estimated 1 million to 2 million homeowners who are the weakest and most careless borrowers. With the FHA now authorized to lend up to $729,750 in high-cost areas, some beneficiaries could be fairly wealthy. By contrast, people who made larger down payments or kept their monthly payments at manageable levels would be made relatively worse off. Government punishes prudence and rewards irresponsibility. Inevitably, there would be resentment and pressures to extend relief to other “needy” homeowners.
I think our lawmakers are missing the point. A lot of these folks who are “losing their homes” are speculators. They bought with the intention of watching the property quickly rise in value. Then they would either sell the place at a big fat profit, or just live large off the equity for the foreseeable future.
Most of these owners could not afford these homes in the first place; an exotic mortgage is what allowed them to move in. Even if they get a more manageable mortgage, the payments are still going to be too much for many of them. And now that the house is no longer a cash machine, many of them will probably abandon it. (Have you wondered why there’s not a huge outcry from these millions of distressed owners? Maybe it’s because they’re planning to walk, no matter what happens.)
Since our government has decided to cater to the most irresponsible of homeowners, don’t be surprised if these owners end up stiffing Uncle Sam, the same way they stiffed their original lender.
I don’t know about you, but I’d prefer to see my taxpayer dollars go to people who truly need help.
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Joy said:
Yes this person has it right on the money…my husband and I have been patiently waiting to buy a property so we would not be ending up in the position most of these speculators (whether they want to call themselves taht or not) are in today…now we, of the fiscally RESPONSIBLE ilk are getting totally screwed because the interest rates have gone up and despite us having saved and waited, we are still going to have to settle for less than what we could have even 4 months ago, because the economy has tanked and the mortgage crisis has worsened….GAH!
April 3, 2008 10:43 AM
Cindy Allen said:
Hi, Joy. GAH is right. Lately I’ve been increasingly aware that the whole world is built on debt. Companies make money on debt. If people weren’t allowed to buy cars on credit, no one would own cars. And so forth. I feel your pain.
April 3, 2008 12:50 PM
RealtorDaveE said:
“The whole world is built on debt.” You got that right, Cindy! At least out here in California.
Can’t balance the federal budget–even using the current social security “surplus” to deceptively offset some of the deficit!
Can’t balance the state budget–even in boom times!
And all too many people can’t balance their own budgets!
Is that what you call “leading by example?”
April 3, 2008 3:08 PM
Cindy Allen said:
Exactly, Dave. A perfect example is the checks we’re all getting from the economic stimulus package. We’re practically being ordered by our president to spend it! God forbid we pay off debt with it or — perish the thought — SAVE it.
April 3, 2008 6:36 PM