Fannie and Freddie make it worth your while to be late on your loan

Note to America: Personal accountability is dead.

A new plan by America’s most diligent lenders will allow those in high loan-to-income ratios with at least 90 days of no payment to set up new parameters on their loans. There will be a combination of principal reduction, lower interest rates, and longer terms used to accomplish a 38% loan to income ratio.

(Close your eyes, I’m about to write in uncharacteristic language!)

WTF? Our perfect leadership has managed to create incentive for millions of homeowners to default on their loans.

Oh, I know Republicans want to know what went wrong. If there’s not a coordinated party uprising over this decision, they can look in the mirror for their first clue.

My advice? Offer to renegotiate the loans with predatory interest rates FOR THOSE CURRENTLY MAKING THEIR PAYMENTS. Use 40 years as suggested to get the monthly payments down. Settle these borrowers into a comfortable place before you bail out the others. Take 15 minutes to rewrite the lending laws that demand loans for those who cannot afford them. (I don’t think we’ve seen this common sense idea, have we?) Start prosecuting the jerks who put us in this situation. And no, I don’t care who they were banging in Congress.

Stop throwing Americans who actually TRY under the bus and use some common sense. Republicans, see how far that gets you.

Comments

  1. I’m contemplating buying a house I can’t afford.

  2. Good post. Anger and rage become you.

    Good post. I couldn’t agree more.

  3. Randy in Richmond says:

    I agree with Wilson.

  4. I’m more fond of this “bailout” than I was of, say, McCain’s proposal just to buy up the bad loans–though I’m not in love with this one completely either.

    The problem is that foreclosing on a home has negative consequences that extend far beyond the homeowner and the bank of that one home. Foreclosed homes depress property values, for example, in a number of ways. They may fall into disrepair, and suddenly a neighborhood with a few foreclosed houses looks like a trashy place. They sit on the market for longer, making it hard for responsible homeowners to sell.

    As much as you may want to punish people who made bad decisions (though many were also pushed into loans by originators acting in bad faith), allowing too many homes to go into foreclosure is bad for the people who made good decisions.

    This particular plan is more palatable than previous proposals because it places much less emphasis on forgiving debt as opposed to finding different ways to repay it.

  5. Folkbum, McCain lost. I know you are having a heck of a time now that there will be no one to blame, but you’ve got to get over it, man.

    Why the “punish” paragraph? All I suggested was to step up one tier and help those still paying first. They still made crummy decisions. I’m amazed that you want to assign the homowner’s bad situation to someone else (loan originator) instead of letting them carry the burden. Your thinking will destroy America if it is allowed to prevail. Sadly, I don’t seen anyone currently standing in the way of your majority.

  6. waukesha mom says:

    Cindy

    Your suggestion sounds so much like “help the ones who need it the least, and to hell with the ones who need it the most”.

    Hmmm, where I have I heard that one before?

    Oh right. the ones who didn’t win. got it.

  7. WMom – breath. Do you even understand what I suggested or did you jump to conclusions because it suits you?

  8. Tinkerbell says:

    Hi waukesha mom,
    I understood Cindy to suggest considering helping those still paying their mortgage. I do not necessarily see this as those who need it least.

    There are many reasons why a homeowner may get behind on payments:
    1- foolishly bought without means of repaying
    (this may be the largest category of foreclosures today)
    2- purchased carefully and within budget, then faced sudden unexpected medical bills (this was historically the largest category of foreclosures)
    3- purchased carefully and within budget, then faced with sudden unexpected job loss (this tends to be cyclical, occurring in economic downturns)
    4-natural disaster
    5- home on the market but no buyers
    etc

    If one family suffered a setback 3 months sooner than another family and so their home was already in foreclosure, should that 1st family be the only one helped?

    Perhaps it should go back to reasons why one is unable to pay. People in categories 2 & 3 above may need the kind of help a refinancing bailout may offer… to get themselves over a temporary tough time financially and get back on their feet.

    People in category 1 may need a different kind of help which consists of increasing their financial awareness, developing a responsible sense of priorities (no fancy vacations, luxuries, etc until debts are paid), budgeting, etc. before or in conjuction with receiving funds.

    From time to time Dr. Phil, Oprah, Suze Orman and others weigh in on the topic.

  9. Randy in Richmond says:

    W mom
    Your humility is underwhelming.

  10. Waukesha Mom says:

    Actually, I was thinking that it would be more appropriate to do triage in the mortgage situation – you know, where you work out who needs the help the most, and they get helped first? Seems to work reasonably well in situations like the ER.

  11. Yes and no. Triage – if that’s how you can relate to the issue – is pretty much what I suggested. Only my patient is the US economy, not the individual homeowner. I think it fair to put the economy first since it’s taxpayer money.

    As I articulated (and you soundly rejected Waukesha Mom) put those still at risk but currently able to manage at the first of the line because they have the better chance of rebuilding for the greater good. Eventually get to those who flat were in over there heads no matter what if money is left.