The "Homeowner Bailout Bills", HR5818 and HRH830 are just plain bad policy. I mean, seriously. The people who end up footing the bill here are those who are out there working hard every day, making good decisions and paying their bills. Where's the bailout for my credit card? I want a $50,000 car, but I can't afford it. Should I go buy it and expect the government to bail me out? The car dealer is offering a low interest rate AND cash back.
There are three guilty parties here:
- A party purchasing a home they didn't need for a price they couldn't afford.
- A party (whether a broker, agent or builder or other) pushing the line, "Buy as much house as you can afford. Prices are going to keep going up."
- A party that colluded with the other two to make a risky loan to someone who would never otherwise qualify.
- I'll add a fourth party here......a bunch of freakin' do-gooders about 10 years back who got all excited because not everyone could buy a house. "Lenders are too selective. They should lend money to low income people at rates they can afford." Am I the only one who remembers that?
This program will not help anyone. If someone can't afford the house they are in now, they can't afford it later. From the text of the bills, it appears it is only a 3-5 year government-backed loan, after which the homeowner has to refinance. When they default on this one in droves - and they will - the government will have a bunch of homes to sell off and the Fire Sale will be on. If you think home prices are deflated now, wait three years. This is going to get ugly.
Maxine Waters commented that we bailed out Wall Street, we should bail out "those who vote for us". That's just pandering.......and Wall Street shouldn't have been bailed out either.
Let this one settle out via the market and fewer people get hurt.
Read the bills for yourself at www.thomas.loc.gov