Q: I cannot believe a position what I heard on the radio tonight that helping people stay in homes they never could have afforded with taxpayer funding is a good thing because China will pay for it? China is not paying for this mess; we (aka current and future taxpayers) will owe them!
It is the height of irresponsibility to suggest principal buy downs in any case and is clearly against conservative tenets. Giving people equity is not only against basic conservatism but is unethical. Let’s let the chips fall where they may, we will survive this and teach people that it’s not wise to overextend yourself and much better to live within your means.
A: You are probably right that the chips should fall where they may, but didn’t the government give up on that idea shortly after Bear Sterns last year?
As some politicians have stated, if the barn is on fire you don’t ask whether it’s a liberal or conservative view on how and why you put the fire out. If you believe there is no crisis and no emergency, then you certainly would proceed to go one way.
In years to come, we certainly will see tons of research into the economic causes and problems.
I’m actually participating in a government program this weekend to work with lenders and borrowers to work through their mortgage problems. In many cases lenders will take a big hit. But the hit they will take through a mortgage workout will probably save them money.
In some foreclosure cases, lenders are getting 20-30 cents on the dollar. If, on the other hand, the workout is effective, they can take a much smaller hit. Not an ideal situation but economically it’s better for the banks. I’ll see how it works. It may not. But if it does, the banks will save money and many homeowners will get to remain in their homes.
The plan I will participate in won’t save the person who took out an option ARM loan that was an impossible loan from an economic perspective to support, but it will assist those individuals who could lose their homes if it were not for the plan.
Is it ideal? No. But as a real estate attorney who has seen the purchase and sale market come to a halt, title companies lay off thousands, mortgage brokers go out of business, surveyors hurt, appraisers working elsewhere, home inspectors looking for work, contractors out of business and real estate agents hurting, bringing some equilibrium to the market would be helpful.
I talked to a title company person earlier that commented on how the refinance market in the residential market was starting to have an effect on their business. Without the currently artificially low interest rates, the refinance market would collapse.
As with many government plans, some people who should not benefit will and some people who should benefit won’t. While I appreciate your idea that doing nothing and letting the chips fall where they may is generally sound advice, I would prefer to look at the overall picture and hope that the government plan actually helps today and in the long term.
While undoubtedly the debt load is massive, the loss of tax revenue and productivity if the economy actually fell off a cliff might be greater than the debt load.
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