Advertisement

Archive for Saturday, February 21, 2009

Bailout for homeowners stirs up strong feelings

February 21, 2009

Advertisement

— Banks got bailed out. So did automakers. So why not struggling homeowners?

The question has struck a raw nerve across the country, with critics saying the Obama administration’s latest housing rescue rewards people who bought homes they couldn’t afford. Others counter that the taxpayer-financed plan will slow spiraling home prices and avert a deeper economic disaster.

The debate captures the strong emotions stirred up over who benefits as the government tries to fix the financial crisis. It’s likely to remain on the front burner for months as lawmakers consider other contentious issues — like whether bankruptcy judges should be given the power to impose changes on borrowers’ home loans.

“I feel like I’m doing the right thing paying my mortgage, and now apparently I have to pay my neighbor’s mortgage, too. People are really angry,” said Kim Guymon, a stay-at-home mom who bought a three-bedroom home with her husband in suburban Seattle in 2001 and has watched it drop $150,000 in value since last summer.

Rescuing people whose homes are worth less than they own on their mortgages doesn’t sit well with Robert Bechler, either. Still, the 37-year-old flooring contractor said he sees little choice.

“If they don’t bail those people out, it’s just going to get worse. It’s a necessary evil, I suppose,” said Bechler, who with his fiancee just bought a house in Cape Coral, Fla. for $92,000 after waiting years for prices to fall.

The rescue plan unveiled Wednesday by President Barack Obama offers $75 billion in incentives for banks and investors to reduce struggling home borrowers’ interest rates and make other changes to loan terms. The money will come from the second half of the $700 billion federal financial bailout. The goal is to keep 4 million homeowners out of foreclosure and halt free-falling home prices.

To qualify, lenders and mortgage investors would have to agree on a lower interest rate that would be designed to reduce the borrower’s mortgage payments to 38 percent of their pretax income. The government would then provide financing to bring that ratio down to 31 percent.

Another piece is designed to help borrowers who are still making their payments on time, but want to refinance into lower mortgage rates.

Republican lawmakers and conservative pundits immediately denounced the plan as an affront to free market principles and said it promotes irresponsible borrowing.

Rick Santelli, a reporter for financial network CNBC, compared the government’s actions to those of communist Cuba during a dramatic, televised rant Thursday from the floor of the Chicago Mercantile Exchange.

“The government is promoting bad behavior, America!” he said.

Supporters of the plan are pushing back.

“This is the financial equivalent of what Hurricane Katrina did to New Orleans. Did they know they were living below sea level? Yes. Does that mean we shouldn’t help them? That’s ridiculous,” said Kathleen Day of the nonprofit Center For Responsible Lending.

Comments

JoRight 5 years, 10 months ago

Sadly mike, I'm right there with you. Bailing out the idiots / "the Jones'" of America will be better for us as a whole. Keeping these people in their homes helps the values of the homes around it. Having 1/2 the houses on the block being foreclosed does not help anyone's property value.

Ultimately, it's about people living within their means & as Americans, I doubt this will get through our heads until something major happens (crash of the dollar, a more major economic crisis than the current etc).

Also, this is out there a bit, but I have a firm belief that people are generally overpaid for their skillset / job. Lots of "Tom Smykowski's" out there:

http://www.break.com/usercontent/2008/4/Office-Space-I-have-people-skills-488721.html

james bush 5 years, 10 months ago

Obama wants to be fair........I hope........because he campaigned that he was the candidate to bring "HOPE AND CHANGE." How about he says/supports all U S citizens with mortgages get a new deal, not just his ACORN constituents and those in FANNIE MAE and FREDDIE MAC !? Jim Cramer on CNBC proposes that all mortgage holders get an opportunity to refinance and get a 40year,4% mortgage!! What would be wrong with that kind of "distributive" share-the-wealth philosophy?

james bush 5 years, 10 months ago

PS: The idea of bankruptcy judges or any judges getting more power in our "representative" democracy scares hell out of me!

monkeyhawk 5 years, 10 months ago

"To qualify, lenders and mortgage investors would have to agree on a lower interest rate that would be designed to reduce the borrower’s mortgage payments to 38 percent of their pretax income. The government would then provide financing to bring that ratio down to 31 percent."

Then .... after they stiff the lenders again, the government will just give them the house.

JoRight 5 years, 10 months ago

Agnostick,

Easy; we were all having a great time watching the funny Wamu commercials about "flexible lending rules." I mean, seriously. . .if by "outrage" you meant "outrageous laughter" lulz.

Crazy. Wonder if there will be any commercials about "flexible lending" now? :)

beatrice 5 years, 10 months ago

How many people who lived beyond their means -- buying too big a home for themselves and investment properties elsewhere, the SUV for the Mrs. and the Hummer for the Mr., the private schools, the designer clothing, etc. -- are Republicans? My bet it is the majority of them (not the majority of Republicans, of course, just a majority of those who live beyond their means). Honestly, how many Democrats do you know who drive around in a Hummer? So, if barrypenders wants to "shoot" them, I say go for it. It will only be thinning out your herd.

Regarding this debacle of an economy Obama was handed, I think he is doing the right thing for economic stimulus, but that doesn't mean I necessarily like it. For instance, I think there should be some form of payback, perhaps through income tax, for those who are forced to refinance lower mortgages. It is true that stopping the glut of foreclosures will benefit all home owners, but it shouldn't be a free ride. In the same way, banks and corporations shouldn't be getting a free ride.

And those thinking this is all Obama's fault, just remember that during the debate John McCain also spoke of his plan to buy up these same mortgages -- and I'm pretty sure he wasn't talking about using Cindy's money.

Agnostic, I like where you are headed, but in fact the bailout money is mandatory -- I've always paid my bills, don't live beyond my means, have money in savings, put 20% down when I purchased a home I can still afford, have a credit rating of 821 and paid cash for our last car purchase, and yet as a taxpayer it will be mandatory that I help pay for the bailout. Similar to the war in Iraq, I can't choose not to pay for it even if I don't like it. Payment will be mandatory.

I do think that this stimulus package will help in the long run, but I hate knowing why we have to do it. We can't allow the housing market to tank, just as we can't allow the banks to close. We shouldn't have allowed the country to get in the debt it did under Bush, and we should have done more to stop the trend of giving homes to those who couldn't afford them that started under Clinton. We are now living with the consequences of fewer and fewer restrictions being placed on corporations and the banking industry. We now must all tighten our belts, and eventually we all will have to pay.

beatrice 5 years, 10 months ago

Good point max! I mean, how could anyone have trusted Henry Paulson with anything? This should be obvious, because he looks way too much like the bad guy from Phantasm!

But then again, these are the same people who supported the Evil Emperor, Dick Cheney.

Since Bush's plan didn't include oversight, I think we should forclose on his "ranch."

Newell_Post 5 years, 10 months ago

The banks need to survive to assure the survival of the economy. I just wish there were a way to preserve the banks without rewarding the bankERs who dove them into insane positions. The bankERs who did this need to be stripped of their personal assets and jailed for fraud.

People stupid enough to take out loans they had no hope whatsoever of paying don't deserve any help.

The banks also need to be re-regulated. There was nothing wrong with Glass-Steagall Act of 1933, and it should just be re-instituted as originally written.

Commenting has been disabled for this item.