Tuesday, December 9, 2008

Mortgage Relief Programs

New data came out this week from the Office of the Comptroller of the Currency and the Office of Thrift Supervision showing that borrowers who have taken advantage of the mortgage relief programs are still defaulting by about half. It seems that many of the borrowers simple can not afford the new terms.

The question I have is; how far are we willing to go to keep individuals who made irresponsible decisions in their home? At what point are we simply giving them the home? Not questions I have an answer to.

I do believe we need relief for individual homeowners and not only big corporations to get the economy moving again. That does not mean all borrows should get relief. I like Sheila Bair’s plan. Her plan will lower the interest rate to3-4.5% and your loan payment will be no more than 38% of your income. Borrowers will have to pay interest on deferred principal. The part I do not like is if the borrow ultimately defaults the government (taxpayer, you and I) are on the hook for 50% of the losses. Although I do not like I think it needs to be there to get lenders moving on the plan.

The Bair plan has angered many individuals because it is not fair to those of us who took out responsible mortgages and have been making are payments. At some point we need to get past that and have a plan in place that will benefit everyone in the long run. Sometimes life just isn’t fair and this is certainly a prime example.

Have you been making your mortgage payments on time and do you agree with bailout of borrowers?


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