So, the government will subsidize people's mortgages. They want homeowners in distress to renegotiate a lower payment and the government will make up the difference to the bank. Lots of things wrong with this idea.
First, let me say that there may be *some* homeowners that are in distress through no fault of their own. But, let's look at the most likely scenario of how most of them got in trouble.
I make $35K year, and after many years, I save $20K as a down payment, and go to the bank to get a loan for a $200K home, which is about the most I can afford. The slimy loan officer tells me, "...you know what, I can set up the papers so that I can show you can afford that new $450K house they just built, up on the hill". My heart is pounding,... "what that beautiful 3-car garage home, are you serious?" "Yes, don't worry, we'll set it up so you only pay the interest for a the first two years, and then we'll re-negotiate a term at that time, it'll be O.K." I'm so excited, of course, "go ahead, draw up the papers,...." that beautiful house on the hill... it will be mine, oh my God. Of course, it doesn't cross my mind that I am only making $35K a year, that I can't even afford to keep-up the house, never mind pay the real mortgage. So, here we are a few years later, and I want the government to help me, I am screaming bloody murder, I was misled by the loan officers, the government has to do something about it. Give me a break! What, I didn't know that I was only making $35K a year? I didn't know that all I could afford was a $200K home? Who are we kidding here. And, even if we assume for a second that I didn't know, is that an excuse? Shouldn't I know? Can you imagine going to court for having bought a stolen car, and trying to use the excuse... "Your honor, it's not my fault, I didn't know that when I was paying $5K for that brand sparkling new $80K Mercedes, there was something wrong". And what, do you expect the judge to say, "...Oh, don't worry... it's not your fault, we'll just help you pay for the difference so you can keep it".
Doesn't that sound like what's going on here?
And then, there is another issue. The government is going to supplement these mortgages, and the want people to keep making payments on a property that keeps losing value? Now, how much of a business sense does that make?
Oh, I forgot, the government will only help those families in distress. So, let's see. Finally, three years ago, after working long hours for many years, my wife and I were able to save enough money to put as a down payment to build a home the way we wanted it. Last year, my wife lost her job, and is now working part time, that's the only thing she could find. To make enough to carry our new home mortgage, I am working an average of 65 hours a week in a descent paying job (thank God I have this job). We are just able to stay above water. But guess what, we do not qualify as a "family in economic distress". If I go back to working just 40 hours a week, we would. Talk about an incentive to become state-dependent.
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