U.S. home loan bailout for ARM borrowers

Commentary- U.S. home loan "bailout" for ARM borrowers
Where does the U.S. Constitution grant the Federal legislature the power to rescind otherwise legal mortgage contracts between private lenders and private borrowers?

Apparently, this proposal applies only to sub-prime borrowers who can presumably pay their mortgages before their mortgage interest rates adjust but presumably won't be able to after the rates adjust.

So, if you can pay your mortgage after its rate adjusts, you must do so.

But, if your neighbor can't, the Federal nanny steps in and prevents your neighbor's mortgage holder (and all the securitized investors behind it) from exercising their contract rights if they choose to do so.

So guess who's paying the cost of what otherwise would have been the interest rate adjustment of your neighbor's mortgage?

You are, of course.  There's no free lunch.

And how in the name of God will an incompetent bureaucracy ever implement and administer this statist lunacy?

Who's a sub-prime borrower anyhow?  One with an FICO credit score of 619 but not one with a score of 620?  One who financed 100% of his home's purchase cost but not one who financed 90% of his home's purchase cost?

And how does the bureaucracy decide who can reasonably pay the adjusted rate mortgage and who can't?

If you work two jobs, you can pay your adjusted rate; but, if you only work one job, you can't?

If your wife works, you can pay your adjusted rate; but, if your wife stays home, you can't?

If you rent out an unoccupied room in your house, you can; but, if you don't, you can't?

If you drive a ten-year old Chevrolet and watch a 19-inch TV, you can; but, if you've financed a Cadillac Escalade, a BMW, and a home theater system with a 65-inch plasma TV, you can't?

If you've managed your credit card debt responsibly, you can; but, if you have $50,000 in irresponsible credit card debt, you can't?

It sounds to me like the bureaucracy will be the main beneficiary of this madness--with  thousands of new bureaucrats at $100,000 a year sitting around making bad decisions on inadequate information about who gets rewarded and who gets punished based on arbitrary regulations about as equitable as Russian roulette.

Why can't the politicians simply let the private market do what the private market does?  Wall Street made billions securitizing the credits which made the real estate bubble possible, and everybody in the chain from builders to brokers to banks made billions more.  So, let them now reap the fruits of their own greed--or not, as they themselves choose.

And, if you entered into an adjustable rate mortgage contract financing 100% of a home you couldn't reasonably afford in the first place, then go get a second job, take in boarders, or find another place to live--but don't ask me to pick up the cost of your decision.

And, on top of that, George Bush and his Treasury Secretary are now also requesting Federal legislation to make state and local bonds for governmental mortgage refinancing tax-exempt.

Why can't politicians abide by constitutions and let the private market make its own decisions?

Private mortgage holders can voluntarily reach their own contract accommodations with their private mortgagors if that's what's in their best interests.

And, if it isn't, then why stick $100,000 Federal bureaucrats into the middle of mortgage contracts between private parties--with the power to compel contractual revisions according to some arcane, arbitrary, and inequitable criteria whose long-term effects no one's adequately considered and whose administration no one has adequate information to reasonably manage?

It also looks as if the Bush Administration is gearing up to stick Fannie Mae and Freddie Mac with a bunch of jumbo subprime mortgages too.  At a time when both these quasi-governmental entities already stand to lose billions--at your cost.

• FHA Secure
• FHA website
• Foreclosure listings in MD, DC, VA
• Mortgage blog

• Rate this Post!

  Select Your Rating:

  • 5 Stars (Excellent!)
  • 4 Stars
  • 3 Stars
  • 2 Stars
  • 1 Stars (Poor)

• Share this Post

  Share With A Friend:

  Your Name Your Email

  Friend's Name Friend's Email

  Optional Message

  Send

• Print
• Social Bookmarking

  Add to Bookmarks: