The plan isn't all it's cracked up to be. There are several issues on both the homeowner and investor side as well as the lender and builder side that make this plan problematic in the long term. As the Economic Advisor for Vice President Biden said yesterday, we will "share the pain" -- we being the government and the banks.She details the perverse incentives that only a government could devise: Incentivising people to quit their jobs and quit paying their mortgages to qualify for government assistance, not to mention those underwater who are scooping up a new property at firesale prices and then abandoning the old home. Professor Babb's article is an excellent argument against this plan. Arm yourself. Go read the entire article here.
There is only one problem -- "we" are the taxpayers, and of those that own homes, over 90% of them are still paying on time. It seems like the "Ask not what your country can do for you..." idiom doesn't apply to everyone. The plan won't work. It doesn't address jumbo mortgages, many of which are about to reset this year and through 2011 and don't qualify for Freddie or Fannie mortgages.
It doesn't address the moral hazard of so many people I read about and hear from that are literally not paying their mortgage, but instead are waiting for a government handout.
It doesn't address those who are frustrated by seeing big banks and the "Big 3" given billions of our taxpayer dollars while they pay their negative amortization mortgage on a home that is $200,000 under water -- homeowners that are now encouraging their spouses to quit their jobs so they can get an even lower payment under the new 31% DTI.
http://www.thestreet.com/print/story/10465005.html
http://www.chicagotribune.com/business/chi-rosenthal-23-feb23,0,6124753.story
5 comments:
it shouldn't surprise anyone (it definitely doesn't surprise me) that the gov't is doing something dumb...to fix something that got screwed up in the first place...by gov't.
the stock market reaction to this bs proves that not many are buying the post turtle's proposed solutions.
it's going to get much worse if these types of solutions are all they have.
Rick Santelli the Tea Party guy has it right: Uncertainty of what the feral government will do next is killing any chance of recovery
Opinions are like backside exits --everybody has one. There are the experts that know everything but still can figure out what cause of this the current problem. It lies somewhere Washington Helping and Wall Street greed? Where do we start? To much goverment or not enough goverment? More Taxes or less taxes? To much expansion of our exonomy or not enough expansion of the economy? To nuke Iran or Not to Nuke Iran? Should we wait for the fuel prices to double again to finish the job?
Sombody on Lou Dobbs had it right-I am neither republican not Democrat but American. To much talk and not enough action!!!
Ron:
There is no such thing as an expert who knows everything. That is the first fallacy of government.
Why don't you post an article for us on how to set yourself up to reload on a budget? I've got a 7mm mauser and damn, the ammo is getting expensive!
Your right there is no one expert but there sure seams to be alot of them!!!
7mm Mauser is a very old modern round. I think it was one of the first to use modern rifle powder. Now keep this in mind since this was same round the spanish used when going up san juan hell in cuba during the Spanish-American war. This is a good relic and probably fun to shoot but if your only going to shoot it every 2 years then don't get into reloading because it is not cost effective. The start up cost of reloading is going to be easily over 200 dollars.
My reloading supplies have actually went up by a half over the last 2 years. I reload because I have bought stuff over time and it cost effective I do it. I don't reload everything I have only the sutff where is saves me money do the cost of shooting ammo. The best way to find how to reload and that is to read, find somebody that does, learn from them and then be as anal retenative as possible because a simple mistake can cost you your life.
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