Thursday, December 6, 2007

At Least Subsidize In A Way That Makes Sense!

You may or may not be aware that I twisted off the other day with all of the sub-prime mortgage "crisis" the-sky-is-falling ado that has been going on. I've gotta hand it to the Federal Government. They have managed to come up with the solution that will do nothing. That's right. They're going to do something that is really nothing to feel like they're doing something when, in reality, nothing will happen. Intrigued? Who wouldn't be? Here's their plan:

Their plan is to put a five year freeze on the subprime mortgage adjustable interest rates for loans that were taken out between 2005 and the end of July. This move is being done because those interest rates, (being adjustable and all, thus, their name) are due to reset soon (as they were expected to) and will result in higher payment for those responsible for paying the mortgage (I just can't call them homeowners. They don't own anything...especially CASH!). Apparently, since all of these people took out adjustable rate loans that they knew that they wouldn't be able to afford once they adjusted (hence, the term...again) the government seems to think that this will help them stay in their homes and avoid foreclosure.

The main question I have (other than "Where's the exit?") is, what happens after five years? Then what? Mind you, this doesn't appear to do much for people who are already behind on their payments and facing foreclosure. And THAT is the problem at the moment. There are a gazillion irresponsible people out there with loans they cannot afford to pay back that are facing foreclosure. They seem to still be screwed; which they should be. So I fail to understand how helping those who are doing what they are supposed to be doing so that they don't end up like the people who didn't do what they were supposed to do is going to be helpful at all. I see how it could slow down the over-inflated housing market collapse, but that doesn't mean it's going to stop it. The market was falsely inflated by a ridiculous amount and it will have to correct itself by a ridiculous amount. That's pretty much how economics work. It's going to happen regardless

Here's the thing, though: Why do I seem to never hear about how the foreclosure process works when the topic of all of these people "losing their homes to foreclosure" comes up? Do you realize how long one must go without making a payment before proceedings are even initiated? It's a while. It's a minimum of three months before paperwork is started in most cases. (After proceedings are started, it can be anywhere from 6 months to over a year before a property is actually put up for auction. It doesn't happen overnight.) But THREE months. WITHOUT paying! And that's not simply not paying the extra amount after the adjustment. That's NOT PAYING. That's also not talking with the bank. That's also not doing anything at all. Can anyone renting even fathom the idea of not paying rent for at least three months? Of course not. And, hey, if you're renting and you can't afford the rent, what do you do? You MOVE!!! Guess what, you irresponsible ARM morons? YOU too can MOVE! Because I've got news for you....if your house is in foreclosure and you're not paying...you're GOING to be moving. It's inevitable. Just put it up for sale now and start packing.

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