The federal gov't (you and me as taxpayers) appears ready to bail out Floating Rate Loan holders, and possibly the mortgage industry. Are you OK with this?
Here's my scenario, hopefully this will help explain more fully :
Back in 2002 chose higher pmt, fixed rate mortgage. I did my homework. I looked at the economic and financial risks. I have a 30 year fixed rate mortgage at 5.125%. I only put 5% down. APR rate loans at the time were 1 - 2% cheaper. Hind-sight is 20/20, but I chose a safer bet.
If a business takes more risk, by lending to high risk borrowers, or if an individual takes on too much debt, should the Taxpayers (the rest of us) bail them out?
By bailing out entire industries and thousands of risky bowers, are we not encouraging the poor behavior? Are we not enabling ignorance?
What are your thoughts?
2007-12-06 04:59:55 · 6 answers · asked by The Paladin 2 in Politics & Government ➔ Law & Ethics
No.
People who chose the lower rates have benefited from them up until now. As you say, they made the choice, and should have to live with the consequences.
When Government protects people from the negative consequences of their own poor choices, it encourages those choices. We saw EXACTLY this scenario in the savings and loan meltdown some years ago.
People invested their money in the most marginal and under-capitalized of S&L's because they were offereing higher interest rates, completely ignoring how safe that S&L might be because they knew that their savings were Government insured.
If there had been no FDIC insurance, there wouldn't have been the insane pressure on even 'safe' S&L's to hike their rates to unsustainable levels to attract customers, because only the "gamblers" would have been investing in shaky S&L's.
Richard
2007-12-06 05:05:21 · answer #1 · answered by rickinnocal 7 · 2⤊ 0⤋
No bail out. The Government is at least partially if not wholly responsible for the problem. They will certainly screw up ant bail since the motivation is purely political.
I have absolutely no sympathy for the lenders. Over the years I have received hundreds of calls trying to get me to refinance. They would always promise to save me money, but couldn't quote an interest rate.
As for the borrowers, I could see a refinancing arrangement for the ones that were truly duped by the lenders. Of course the problem with that is determining who they are. To me this would make a refinancing arrangement impractical.
2007-12-06 05:19:28 · answer #2 · answered by Gary H 3 · 0⤊ 0⤋
I agree with you to a point. I believe that they are looking to cap rates more in the 7-8% range, so you will still be better off in the long run. In the end it may be to everybody's best interest to prevent too many foreclosures. I won't be too happy if the value of my house drops 50% because the market tanked, even if I am smugly secure with my 5.625% fixed rate loan.
2007-12-06 05:09:11 · answer #3 · answered by Brian A 7 · 0⤊ 0⤋
The reason things like this are looked at as a gov. fix is because of wide spread effect on our fragile economy. our growing national debt and the huge investment foreign governments (china just invested 3 billion in blackwater, that's the chinese government, investing)
In an environment of weakening dollar, world wide and a growing deficit to foreign governments who are not necessarily our financial friends, this type of largescale personal/business disaster can be extremely devastating to our overall economy.
as far as encouraging poor judgement, most people don't have the financial savy to argue w/ normally trusted lenders. these loans are primarily from banks, not secondary lenders that u expect scams from.
at this point in time, it is a question of national, financial security.
great question
2007-12-06 05:14:53 · answer #4 · answered by paigespirate 4 · 0⤊ 0⤋
My first thought of course is to totally agree with you. A person should be responsible for his risk-taking.
And I also chose the fixed rate and cannot overstress how pleased I am with myself. *** pats self on back ***
But, on the other side of the coin, there are so many foreclosures going on that this could negatively affect the economy.
The question is: Is it better to bail out the borrowers: Or is it better to deal with the plethora of bankruptcies, the glut of homes put on the market and unable to be sold, and even possibly subsidised housing for many dislodged borrowers.
Are WE better off if we bail them out or not? This should be the consideration really.
2007-12-06 05:11:52 · answer #5 · answered by Wyoming Rider 6 · 0⤊ 0⤋
NO. These people get a lower rate than the rest of us, and now they want us to bail them out? Let me sit down for this...they pay less then, and now they have to pay less? We pay more from the beginning, and now we are asked to pay more? This country is forgetting about those who work hard and make responsible decisions.
This is how Liberals think. They hate people who do the right thing.
2007-12-07 05:31:22 · answer #6 · answered by Stereotypemebecauseyouknow 7 · 0⤊ 0⤋