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Wednesday, February 18, 2009

Does this make sense??

Obama to Unveil Plan Aimed at Helping Troubled Homeowners - Presidential Politics Political News - "For a $250,000 mortgage at 7.5% interest, the borrower is currently making a payment of $1,750 per month. If the rate is bought down to 5%, the new payment would be $1,350 per month -- a savings of $400 per month. The cost to the federal government, assuming a 50% match by the servicer: $200. For $1 million, the federal government could reduce the rate for 50,000 borrowers. By comparison, the same $1 million might purchase a handful of mortgages, or guarantee a few hundred." Okay - I like the idea of bringing down mortagage rates ... they should have to do it for student loans too ... BUT not everyone will be effected.

Okay, I agree that there are certain cases where its not the families fault that they can't pay their bills ... some one gets hurt, someone loses a job due to down-sizing, death in the family, etc ... those are viable reasons to me ... those are 'acceptable' reasons to qualify for a reduction in fees.

BUT by the sounds of it, anybody who has fallen behind will qualify for this thing. Not just the people in the above circumstances but those who have simply walked away from their mortgages too.

I'm sorry that just doesn't sound right.

Don't get me wrong - it is a horrible thing that families are losing their homes ... we don't want Hoovervilles springing up again ... but then we don't want people to feel like they are being punished for paying their bills either.

Seems to me that the money put up by the government should be treated as a loan as well that needs to be paid back .... when we lived at the old place we were part of a project meant to increase the R-factor of homes (insulation factor to bring down bills and use less resources), for this plan we qualified for a loan - BUT part of the loan was an eight-year residence clause.

Basically what it said was if we LIVED in the home (not just not sell it, but actually resided there) then after 8 yrs the loan was forgiven ... but if we moved out before that time we would have to pay the loan back plus interest.

Now why can't the government do something along these lines??

Simply say that people can get a subsidy from the government IF they PROMISE to stay in their home for 10 years ... yes 10 years.

This will actually do several things ...

first it will build neighborhoods ... right now the average time spent in a house is like 5 yrs, so most people don't bother to get to know their neighbors.

second, it will cut down on crime rates because once people have a stake in the well-being of a neighborhood they are more likely to 'protect' it.

third, people will become more involved with local government ... instead of thinking "hey we only have to put up with it for a little while" people realize they have to make their opinions known to keep down such things as property taxes.

fourth, house prices will be kept more reasonable ... when people do the quick-flip of houses the one thing they want is for housing prices to get out of control because they make money on it ... they don't care if their house is being over-valued - once they have to stay for a while they want to keep the propery value more true.

It should also contain something that prevents a second mortgage from being taken out on the property for the same period except in extreme circumstances (after all you don't want to punish people if something happens and the really need that money) so that people aren't just taking out a second loan because they got themselves in trouble yet again with the credit cards (I've been there, done that, don't ever want it again).

I agree something should be done ... but lets not jump into the pool without checking to see how polluted it is first ... that's pretty much what got us into trouble in the first place -- people jumped into a loan without looking for 'sharks'

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