Housing Bailout
A monstrous housing bill has been passed by the House, bailing out mortgage companies and irresponsible borrowers (and incidentally, a few deserving individuals in lieu of collateral benefit). This summary by NPR is essential read. The main provision seeks to help homeowners facing foreclosure. Here is how it is claimed to work: - Homeowner originally bought the house for 300K in Las Vegas in 2006 - House value has plummeted to 200K in 2008 - Lender agrees to lower mortgage to 90% of current value (i.e. 180K). Write off 120K. - Homeowner eligble for lower rate FHA loan for the 180K. - FHA pays off Lender 180K. Takes the loan onto its books. - Home prices stabilize because homeowner can afford low interest 180K, avoiding foreclosure. - Taxpayer does not incur any cost since the homeowner is going to pay back 180K on the taxpayers book with interest. As always, you cannot get something for nothing. The something comes from the bankers who need to write off 120K. Why would th