Saturday, July 27, 2013
It's Time For A Homeowner Bailout
Here is how we can give a bailout to homeowners, and it will also help the banks.
Assume Michael and Jan have a home mortgage owing the bank a principle of $300,000. The home has a market value of $200,000. Bailout funds for the difference in the principle amount of the mortgage and market value, $100,000, can be paid to the bank, but the bank must re-finance the home for $200,000, at no re-finance costs to Michael and Jan, and at a fixed rate of 3.5% for the term of the original loan.
This will lower the monthly mortgage payment for Michael and Jan, considerably. The money they save can be used for "frivolous" things, such as food, clothing, education, medical coverage and perhaps even a family vacation they have not been able to take for years. They may even be able to put some money into savings to replace money they had to use to make mortgage payments over the past few years.
This kind of "frivolous" spending will actually stimulate the economy, instead of lining the pockets of bank executives whose poor management lead to the need for a bailout. Members of congress all agree there is a need to stimulate the economy. What better way to stimulate the economy than to allow Americans to spend their money for the things they want and need?
Of course, no member of congress would think to help their constituents in this manner. The President is proposing more government guaranteed, thirty year home mortgages with a 5% down payment, which is exactly what got us into the mess we are in now, and it does nothing to help those who are now in foreclosure, or facing foreclosure.
Does anyone wonder why no politician has proposed a bailout for homeowners, such as the one I propose in the preceding paragraphs? Should you ask them why?
Yes, and when you ask them why, remind them that you will be at the polls, casting your vote for their re-elections. Remind them that each bank executive who received millions in bonus pay after the last bailout casts only one vote. The did so while foreclosing on millions of constituents. Why do members of congress protect bank executives bonuses while they watch their constituents being evicted from their homes?