Post by unlawflcombatnt on Apr 13, 2007 2:46:13 GMT -6
Below is a copy of an article by Patrick from patrick.net explaining the subprime mortgage bailout proposed/backed by Senators Hillary Clinton, Charles Schumer, and Chris Dodd. I agree wholeheartedly with Patrick on this one. Bailing out subprime borrowers is not only rewarding home buyers for excessively risky behavior, it's rewarding the over 50% of recent home buyers who were buying for investment purposes (speculators/flippers), as well as bailing out the subprime lenders themselves. Below is
Patrick's article.
"Stop the Subprime Bailout
Subprime lenders' stocks surge as responsibility for bad lending shifts from subprime lenders and borrowers onto taxpayers.
Can you spare a few thousand dollars to pay somebody else's mortgage?
Congress thinks you can, especially senators Christopher Dodd and Hillary Clinton. What's more, a lot of the people you're being asked to bail out lied on their loan applications or signed up for loans without reading the terms.
Here's what's going on, as explained by Caroline Baum of Bloomberg.com:
'During the housing boom of the last five years, people with bad credit histories, many of whom lied about their income and nature of employment, got mortgage loans they weren't qualified for to buy houses they couldn't afford. Now that house prices have stopped rising, and the house can't be refinanced or sold at a profit, Congress wants the taxpayer to subsidize the mortgages so these folks can remain in their unaffordable houses.'
The proposal to bail out subprime borrowers may seem humane, but it's wrong. The argument is that borrowers who signed up for subprime loans had no idea what they were doing. They didn't understand the loan documents, or didn't read them. Some borrowers may have been victims of predatory lenders (whose stocks have already surged on talk of a bailout). But many more borrowers simply gambled on risky loans in hopes of flipping property for big profits, or knowingly lied about their income just to get a bigger house. Don't reward these irresponsible people with property, paid for by you and me!
Politicians will exploit your emotions by saying they want to help people "keep their homes". But remember that the people in financial trouble already had houses. They got into this mess by trying to buy bigger and fancier houses than they could afford. If we do help them, it should involve them moving back into houses they can afford.
How about requiring bailout participants to prove that they did not lie on their loan applications? We could start by reporting undocumented "stated income" from loan applications to the IRS.
Will the special aid package be indefinite? Can I go tomorrow and get a loan for a house I can't afford, and then in two years when the rates reset, will I also be eligible for free mortgage payments? Should speculators get preference above citizens who have been saving rather than borrowing? What message does that send about responsibility?
The proposed bailout is a moral hazard. It encourages the bad behavior that got us into this mess, because the punishment for foolish borrowing is applied to you and not to the people who made the bad decisions.
Bailing out borrowers also means bailing out their lenders. If lenders have to foreclose, then they have to sell the house for less than the loan amount, and this means an actual loss to the lenders. That threat of loss gives lenders a motive to help borrowers by restructuring the loans, maybe extending the time to repay. On the other hand, using our tax dollars to keep people in houses they cannot afford would be "socializing" lenders' losses, meaning taxpayers like you and me would be paying the bill and guaranteeing the profits of predatory lenders.
Under proposed bailouts, responsible people lose and have to give their money to gamblers, liars, and sleazy lenders. This is privatizing profits and socializing losses. It doesn't matter if you have been dutifully paying your monthly fixed-rate mortgage. It doesn't matter if you bought a smaller house based on what you could truly afford. And it doesn't matter if you're a renter who chose not to jump into the housing mania. Congress is proposing to make it your job to pay up for others' irresponsibility. Why don't they just tax you to cover Las Vegas gamblers' losses as well? That's pretty much what they're proposing.
But it's not too late. You can contact your representatives and ask them to stop this foolishness. Tell them to let the market correct itself. Tell them that it's okay for people to rent instead of owning. Tell them to punish predatory lenders, but not to punish you and me for things the lenders and borrowers did. Tell other people about this page and ask them to write their representatives too.
Discuss with other readers. Mail p@patrick.net if you have suggestions for changing this page.
Sen. Christopher Dodd (D-Conn) has said that Congress must consider providing aid to about 2.2 million subprime-mortgage borrowers who are at risk of defaulting and losing their homes (Bloomberg). Dodd is running for President in 2008. Call his office at (202) 224-2823.
Sen. Hillary Clinton (D-NY) has called for a 'foreclosure time out' and for raising FHA loan limits to help more low-income home buyers (Reuters). Clinton is running for President in 2008. Call her office at (202) 224-4451. If you can't get through, leave a message.
Write your own Representative and Senators!
Find Your Representative
Find Your Senators
SAMPLE LETTER - If you are at a loss for words, copy the following letter into the email you send to your Representative, and be sure to include your rep's name and your name and location before sending :-)
Dear X Representative,
Please do not support the efforts to bail out subprime
borrowers with my tax dollars. As a responsible citizen, I
do not feel it is right for you to ask me to pay for other
peoples' financial mistakes, especially since a bailout
encourages sleazy lenders to keep on making predatory loans,
with the assumption that taxpayers are on the hook.
I appreciate the goal of helping people to have access to
housing, but the proposed subprime bailout will only reward
people who acted irresponsibly, and it will punish people
who work hard and diligently manage their finances by not
buying houses which they cannot afford.
The housing market has begun a process of correction. This
is necessary in order to keep housing affordable in the
long-term. Let the market correct so we can achieve
stability again, and people are able to save and afford the
house of their dreams over time. That really is the true
American Dream.
Sincerely,
Your Name
City, State"
I'll be sending my letter to Senators Boxer and Feinstein. Hopefully the possibility of losing many of their Democratic voters will help them see the light on this one.
Patrick's article.
"Stop the Subprime Bailout
Subprime lenders' stocks surge as responsibility for bad lending shifts from subprime lenders and borrowers onto taxpayers.
Can you spare a few thousand dollars to pay somebody else's mortgage?
Congress thinks you can, especially senators Christopher Dodd and Hillary Clinton. What's more, a lot of the people you're being asked to bail out lied on their loan applications or signed up for loans without reading the terms.
Here's what's going on, as explained by Caroline Baum of Bloomberg.com:
'During the housing boom of the last five years, people with bad credit histories, many of whom lied about their income and nature of employment, got mortgage loans they weren't qualified for to buy houses they couldn't afford. Now that house prices have stopped rising, and the house can't be refinanced or sold at a profit, Congress wants the taxpayer to subsidize the mortgages so these folks can remain in their unaffordable houses.'
The proposal to bail out subprime borrowers may seem humane, but it's wrong. The argument is that borrowers who signed up for subprime loans had no idea what they were doing. They didn't understand the loan documents, or didn't read them. Some borrowers may have been victims of predatory lenders (whose stocks have already surged on talk of a bailout). But many more borrowers simply gambled on risky loans in hopes of flipping property for big profits, or knowingly lied about their income just to get a bigger house. Don't reward these irresponsible people with property, paid for by you and me!
Politicians will exploit your emotions by saying they want to help people "keep their homes". But remember that the people in financial trouble already had houses. They got into this mess by trying to buy bigger and fancier houses than they could afford. If we do help them, it should involve them moving back into houses they can afford.
How about requiring bailout participants to prove that they did not lie on their loan applications? We could start by reporting undocumented "stated income" from loan applications to the IRS.
Will the special aid package be indefinite? Can I go tomorrow and get a loan for a house I can't afford, and then in two years when the rates reset, will I also be eligible for free mortgage payments? Should speculators get preference above citizens who have been saving rather than borrowing? What message does that send about responsibility?
The proposed bailout is a moral hazard. It encourages the bad behavior that got us into this mess, because the punishment for foolish borrowing is applied to you and not to the people who made the bad decisions.
Bailing out borrowers also means bailing out their lenders. If lenders have to foreclose, then they have to sell the house for less than the loan amount, and this means an actual loss to the lenders. That threat of loss gives lenders a motive to help borrowers by restructuring the loans, maybe extending the time to repay. On the other hand, using our tax dollars to keep people in houses they cannot afford would be "socializing" lenders' losses, meaning taxpayers like you and me would be paying the bill and guaranteeing the profits of predatory lenders.
Under proposed bailouts, responsible people lose and have to give their money to gamblers, liars, and sleazy lenders. This is privatizing profits and socializing losses. It doesn't matter if you have been dutifully paying your monthly fixed-rate mortgage. It doesn't matter if you bought a smaller house based on what you could truly afford. And it doesn't matter if you're a renter who chose not to jump into the housing mania. Congress is proposing to make it your job to pay up for others' irresponsibility. Why don't they just tax you to cover Las Vegas gamblers' losses as well? That's pretty much what they're proposing.
But it's not too late. You can contact your representatives and ask them to stop this foolishness. Tell them to let the market correct itself. Tell them that it's okay for people to rent instead of owning. Tell them to punish predatory lenders, but not to punish you and me for things the lenders and borrowers did. Tell other people about this page and ask them to write their representatives too.
Discuss with other readers. Mail p@patrick.net if you have suggestions for changing this page.
Sen. Christopher Dodd (D-Conn) has said that Congress must consider providing aid to about 2.2 million subprime-mortgage borrowers who are at risk of defaulting and losing their homes (Bloomberg). Dodd is running for President in 2008. Call his office at (202) 224-2823.
Sen. Hillary Clinton (D-NY) has called for a 'foreclosure time out' and for raising FHA loan limits to help more low-income home buyers (Reuters). Clinton is running for President in 2008. Call her office at (202) 224-4451. If you can't get through, leave a message.
Write your own Representative and Senators!
Find Your Representative
Find Your Senators
SAMPLE LETTER - If you are at a loss for words, copy the following letter into the email you send to your Representative, and be sure to include your rep's name and your name and location before sending :-)
Dear X Representative,
Please do not support the efforts to bail out subprime
borrowers with my tax dollars. As a responsible citizen, I
do not feel it is right for you to ask me to pay for other
peoples' financial mistakes, especially since a bailout
encourages sleazy lenders to keep on making predatory loans,
with the assumption that taxpayers are on the hook.
I appreciate the goal of helping people to have access to
housing, but the proposed subprime bailout will only reward
people who acted irresponsibly, and it will punish people
who work hard and diligently manage their finances by not
buying houses which they cannot afford.
The housing market has begun a process of correction. This
is necessary in order to keep housing affordable in the
long-term. Let the market correct so we can achieve
stability again, and people are able to save and afford the
house of their dreams over time. That really is the true
American Dream.
Sincerely,
Your Name
City, State"
I'll be sending my letter to Senators Boxer and Feinstein. Hopefully the possibility of losing many of their Democratic voters will help them see the light on this one.