The federal gov%26#039;t (you and me as taxpayers) appears ready to bail out Floating Rate Loan holders, and possibly the mortgage industry. Are you OK with this?
Here%26#039;s my scenario, hopefully this will help explain more fully :
Back in 2002 chose higher pmt, fixed rate mortgage. I did my homework. I looked at the economic and financial risks. I have a 30 year fixed rate mortgage at 5.125%. I only put 5% down. APR rate loans at the time were 1 - 2% cheaper. Hind-sight is 20/20, but I chose a safer bet.
If a business takes more risk, by lending to high risk borrowers, or if an individual takes on too much debt, should the Taxpayers (the rest of us) bail them out?
By bailing out entire industries and thousands of risky bowers, are we not encouraging the poor behavior? Are we not enabling ignorance?
What are your thoughts?
Should the Federal Gov%26#039;t bail out people or lenders who took riskier floating rate loans for cheaper payments?
I believe the the Government should never get involved with private business.
The lenders who made the loans and the people that signed their names on the dotted line are the ones that should be paying for this mess.
It%26#039;s another case of people whining when the lenders do exactly what they told them they were going to do. If the people can%26#039;t make their payments when their mortgages adjust, tough, let them lose their homes and let the mortgage companies eat the losses.
That%26#039;s the chance you take when you gamble, sometimes you win and sometimes you lose.
But that%26#039;s just me I believe in personal responsibility.
Should the Federal Gov%26#039;t bail out people or lenders who took riskier floating rate loans for cheaper payments?
Well the government should not bail out the industry.
That being said. How many high risk mortgages are there out there? 5% of outstanding mortgages. If 5% of people lose their homes what happens? deflation in the housing market, and people like you and I lose a lot of equity in our own homes.
Yes, its not fair to everyone. The real problem is the low interest rates of the last 15 years have resulted in people living beyond their means because debt is so cheap to finance.
Should the Federal Gov%26#039;t bail out people or lenders who took riskier floating rate loans for cheaper payments?
Taxpayers should not bail out an industry, business, or individual for poor choices. This does encourage cheats.
Should the Federal Gov%26#039;t bail out people or lenders who took riskier floating rate loans for cheaper payments?
I%26#039;m on the fence with this one. The lenders should not be rescued at all, they knew the risks went along with people whom they knew may be unable to pay a mortgage if the interest rates were to come up.
I think the government should come to the rescue of people who are in financial distress, but not bail them out. Maybe lower their interest rate and lock in a more feasible payment plan, and tack on the amount owed into the time they will pay. This way the banks will continue to make their millions. I think the predatory mortgage companies, since they decided to make the payment the governments issue, should have a more permanent punishment for helping to hurt our economy.
Should the Federal Gov%26#039;t bail out people or lenders who took riskier floating rate loans for cheaper payments?
If your neighbor%26#039;s house is on fire, and they may have been smoking in bed, do we not send out the fire department to put out the fire. Of course not, the fire could spread to other homes in the neighborhood.
In the case of these sub prime mortgages, a good number of the borrowers were hoodwinked by the mortgage broker to get a riskier loan so the broker could get a fatter commission. Of course they should have read the fine print, but how many of us actually do read the fine print.
There are also consequences to not doing the right thing for these people. There will be a downturn in the market. There will be less real estate tax money collected. There will be cuts in local government funding for the police, the fire department, schools and government run hospitals.
So if you were in charge, what would you do?
I would get some federal government funding in there right away.
Should the Federal Gov%26#039;t bail out people or lenders who took riskier floating rate loans for cheaper payments?
Paladin - 1st congratulations for an exceptional job. 5 1/8 is great.
As you already know by your homework, many people were lazy and didn%26#039;t read their mortgage or did and gambled anyway and the dice went the other way, as did the irresponsible %26amp; greedy lenders. Neither should be bailed out. As for whether the proposed rate freeze extension actually helps or not remains to be seen. Any action that slows the foreclosure slide helps everyone. But the bigger problem is the doom %26amp; gloom media reporting. The REAL foreclosure numbers are about .16 %. That means 99.8 % of mortgages are fine %26amp; paying on time. This figure includes homes that don%26#039;t even have mortgages! The percentage is even smaller if you restrict to homes that have mortgages. Also a large percentage of the foreclosures are get-rich-quick small investors who tried to ride the bubble to quick cash by buying up new development homes, then walked away when it burst. Should taxpayers bail them out too?
Should the Federal Gov%26#039;t bail out people or lenders who took riskier floating rate loans for cheaper payments?
I have to agree with you on this - the government should stay out. Too many people got lured into grand notions of a big house and investment properties. They were unable to think much past the next few years.
Even people who had a fixed mortgage started pulling their equity out just because it was there when housing prices started to increase so quickly. Easy money is a strong lure.
My understanding of the bail-out is it%26#039;s only for people who aren%26#039;t already behind in payments. And many of the 3 year ARMs won%26#039;t be 3 until next year.
We%26#039;ll just have to see how this plays out. The housing market needed to get stabilized again. Nothing stays that hot forever.
Should the Federal Gov%26#039;t bail out people or lenders who took riskier floating rate loans for cheaper payments?
Housing prices will continue to decline for a long time (5+ years) with this plan in place.
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