George Bush recently announced a plan to try to "help" with the mortgage meltdown that we've all been watching lately by freezing borrower's loans at their teaser rate for five years.The folks who are going to benefit from this deal are those who have adjustable rate mortgages (ARMs) that are scheduled to adjust upward in the next several months. To qualify, the person must be an owner-occupant who hasn't missed any payments before the initial rate goes up. Also, the loan must have been taken out between 2005 and July 2007 and be scheduled to have a rate increase between 2008 and 2009.
Another part of the program involves moving the folks into FHA programs and allowing them to re-finance into a fixed rate loan. The loans would be guaranteed by the U. S. Government. According to MSNBC, officials think they will be able to help around 300,000 folks with this thing because "the FHA has greater flexibility to offer refinancing to homeowners with good credit histories."
This will give you a warm, fuzzy feeling inside: “We should not bail out lenders, real estate speculators or those made the reckless decision to buy a home they knew they could never afford,” Bush said after meeting with industry leaders at the White House. “But there are some responsible homeowners who could avoid foreclosure with some assistance.”
OK, here are some thoughts:
Another part of the program involves moving the folks into FHA programs and allowing them to re-finance into a fixed rate loan. The loans would be guaranteed by the U. S. Government. According to MSNBC, officials think they will be able to help around 300,000 folks with this thing because "the FHA has greater flexibility to offer refinancing to homeowners with good credit histories."
This will give you a warm, fuzzy feeling inside: “We should not bail out lenders, real estate speculators or those made the reckless decision to buy a home they knew they could never afford,” Bush said after meeting with industry leaders at the White House. “But there are some responsible homeowners who could avoid foreclosure with some assistance.”
OK, here are some thoughts:
- If you aren't missing payments, why do you need a special government-promoted program to deal with your loan?
- If FHA is for people with good credit, how does it help the folks going into foreclosure, who by definition have BAD credit?
- So does moving people into government-guaranteed loan programs NOT help protect lenders from the consequences of lending to people with a known history of not paying their bills?
- Does the government have new technology to figure out whether people were thinking "reckless" thoughts when they got their loans
In the end, I think this thing is a bunch of bunk. I think it's mostly just for show.
There have been a lot of bad decisions made by greedy people at all levels of this mess. When Uncle Sam forces lenders to modify loans, they interfere with deals to which they are not a party. I think that is an abuse of the coercive power of government. If they actually move "credit unworthy" borrowers into the FHA program, they will be distributing taxpayer loot to lenders to cover their losses. (I suspect that this would just be a fig leaf to cover for an industry bail out if this part of the program goes large-scale.) I really think the more government gets involved, the worse it's going to get. They will just mess around and drag it all out. What do you think?
