I would strongly urge lenders, banks and investors to consider agreeing to adjust notes back to the start rate on the adjusting and ballooning mortgages (or the start rate +.25% or .50%).
Don't pay them any incentive or "bailout" to do so.
They made the bad loans or let them be made. Let them take some responsibility for those actions. The result would keep a huge number of people in their homes who otherwise would lose them, preserve the value of the collateral and help minimize future defaults.
True, the investors will get less return than they hoped. But they aren't likely to see their hoped for return on many, if any of these loans anyway. What is better, some return, or none? In real life, if you lend money to someone who you know likely won't pay you back, you usually get nothing.
Bailing out Banks, Lenders and Investors is the worst possible message that can be sent to the American Public. The American Public (Um. And the American Government) makes enough poor financial decisions on its own, without needing encouragement that someone will be there to bail you out for your poor choices.
Fiscal responsibility needs to be taught and practiced by the government and corporations, not just the American People.
There should not be a double standard:
- One for the American people - "Too bad, you lose, you're on your own for the bad choice you made."
- And another for the government or corporations "This stinks, here, we'll just print more money or increase the national debt to cover your stupidity."
Telling institutions they can ignore rational and reasonable practices and still be rewarded is ridiculous.
That's the same story these institutions were selling all those borrowers when they sold them into the loans they shouldn't have gotten into. It's time for everybody to put the greed away and sit down at the table to talk rationally and realistically.
A compromise that doesn't require a complete overhaul of the system would benefit all parties in the long term.
It would be an acknowledgment by all parties that "Yes. We made bad decisions. We all risked more than we were able to bear. We are all to blame. In consequence, we will all give or receive something worse than what we hoped (gambled) for initially."
- Investors get: Lower return than they thought (Not too bad considering if people could refinance their places at lower fixed rates, a portion of this problem would have already been resolved.)
- Lenders get: Fewer (questionable) loan products than they had before. (This has already happened, and is a GOOD thing!)
- Borrowers get: A higher payment than their start rate, but one that gives them a "chance" to keep their home and pay back their loan honorably.
- Future Borrowers get: To save up a down payment for a home, and to learn to use credit wisely and appropriately, thereby reducing the likelihood of another round of this "breakdown" occurring in their lifetimes.
Lenders and Investors should not be the only ones who benefit from a government bailout.
Borrowers need relief as well or any bailout will just be more money thrown at institutions who have proven they have a tendency to make bad financial decisions when the potential reward for doing so, however risky, is great.
I know this won't solve the entire crisis, but sitting down and looking for reasonable and rational compromises is better than just throwing money at the problem. Simply throwing money at it without a long term strategy that successfully addresses the needs of all parties involved will just make things worse down the road.
If you buy a home in Salt Lake City or the Surrounding Area, Make sure you get an Agent on YOUR side of the transaction!
If you have excellent credit and will be buying a $250,000-$750,000 home in the next 30-60 days and would like an agent who will work exclusively for you, call us at (801) 969-8989 or contact us via the link on this page.
©2008 Homebuyer Representation, Inc. "The Real Estate Agents on the Buyer's Side" TM Exclusive Buyers Agents (EBA) - All Rights Reserved
Exclusive Buyer Brokerages do not list homes and never represent Sellers. Their agents represent Buyers ONLY on the Buyer's side of the transaction. They work to get BUYERS the Best Price and Terms when they Buy...
©2008 Homebuyer Representation, Inc. - Salt Lake City, UT
Exclusive Buyers Agents (EBA) - All Rights Reserved
Finally...
Why are we bailing out the banks when consumers were duped into the cruddy loan products the banks sold them...? (At least some of them were "up-sold" the ARM or some other ridiculous loan, perhaps with an inflated Debt/Income ratio as an added bonus?)