Government Bail-Out of Mortgages

If you take my recent post a step further this same issue has also caused the bubble that has now burst and is hurtling us towards a recession. I saw on the Consumerist web site that they were ragging on the Bush administration for only passing some legislature to give people and additional 30-days to figure out how to work something out with their lender before they get foreclosed on.

The comments back were pretty much chastising the Consumerist for taking such a position. I agree with them. As my friend says, anybody has the right to enter into a bad contract or agreement. This goes for the lender as well as the lendee. Nobody forced anyone to buy houses that were (and still are) overly priced on interest only loans with 3 ~ 5 year flexible arms.

They either did it as an investment property, or because they couldn’t afford to do a conventional loan. One guy, and I mean ONE guy on the Consumerist commentators said that it is cold hearted to not consider all of the other things going on in someone’s life like their credit card debt, cost of food, job market, etc. Hey! You know what? It’s called a fucking budget! You take all this stuff into account and then you look at the bottom line and then you’re supposed to say that you either can, or cannot, afford to take out that loan. Lost your job? That sucks, but sometimes that is life. Life isn’t always fair. If I lost my job I have money saved up to get me through. Again, it’s that whole budget thing.

And as for the lenders? They are just as guilty. They knowingly lent people this money without considering the risk of their investment. It was very shortsighted of them and all they saw were the dollar signs flashing in their eyes! Hey! Look at this! This guy can’t possible afford the $400,000 house on this note. If the interest rate changes we’ll get house and his money and then get to resell the house!! YIPPEE!! Only, they didn’t anticipate the consequences of their actions by creating a false economic value of homes.

Here is an amusing stick-figure slideshow of how the process worked.

So now the bottom is falling out and somehow once again the government is being blamed. What about the people making bad decisions?

I applaud the government for taking some steps to try to get people to work it out. The reality, though, is that most of the people defaulting on their loans could never really afford it in the first place. Apparently, a large percentage of them have never made a mortgage payment or were already severely behind. Statistically speaking, these people never pay their bills on time and probably never will.

Now I am hearing of proposed legislation to empower judges to absolve remaining debt on home loans! This is absolutely absurd. What do you think is going to happen when a huge chunk of these banks and lenders get told to go fuck themselves and that they are out BILLIONS of dollars? Who is going to pick up the tab on this one? I suppose Joe-Taxpayer and those that make their mortgage payments, because surly they are going to pass this cost onto the consumer. Yeah, that’s really going to stimulate the economy.