The reality is that the federal government is going to spend more-—in fact, whatever it takes-—in the next years to reverse the effects of the Toxic Twins.
Is that a terrible situation to be in? Yes. But it is what it is.
That said, I think it’s worth considering whether to funnel some of this money to “unfreeze the credit” of the consumers who are not deadbeats and who will use the money and financial flexibility in a way that helps the overall economy.
Restructuring a mortgage with a balance of $500K on a house that is now worth only $300K through no fault of the homeowner who is still throwing good money after bad by continuing to pay the $500K mortgage rather than walking away, seems to me, has a very different economic and moral impact than buying the paper of a deadbeat who put no money down, made very few payments, and walked away.
For one thing, all the people making payments on upside-down mortgages right now have, in effect, lost every penny of their downpayment unless and until decades from now the real estate market recovers on its own.
The subprime borrower loses NOTHING in any of this. Oh, sure, there’s the sob story that they “lost their home.” I call BS on that most of the time. They had to move to a different abode, that’s it. When you don’t even have a penny in the house, how is that different emotionally from being evicted from a rental apartment?
But the people who make this economy work, those who put tens of thousands of dollars down, or more so as to be “wise” and not pay PMI,on their home purchases have at this moment lost every single penny of that cash because of FANNIE and FREDDIE and the Rats’ push for subprime loans.
This loss was not caused by normal market forces-—so it’s not “pay your money and take your chances.” It was directly and indisputably caused by the U.S. GOVERNMENT through the DEMOCRAT party.
They caused, maybe they should fix it.
http://www.freerepublic.com/focus/news/2100113/posts?page=93#93
I hadn’t thought of it that way. You have a good point.