06 Dec 2007
On Mortgage Relief, Who Gains the Most?

I'm going into rant mode in a moment, because very little else that Dubya the Idiot has proposed has quite pissed me off as much.

<rant>

If anyone has been looking for a face to put on the subprime "crisis", take a look a little to your left (and, after this post moves down on the index page, a little up). Yep, that would be me. If you recall, I was laid off about four years ago. That was a year after I bought the farm. Times were tough. Real tough.

I still had debt from finishing up the farm, and I refinanced in 2004 to pay some bills and get some cash out. It was a subprime loan, with a 3% prepayment penalty and due to jump to (basically) prime with a time delay + 3 or more if the prime escalated more than a certain percentage. Complicated formula, but not impossible. And I had three years to get it back together before it jumped. But no low "teaser" rate for me - I wasn't looking to hot as a credit risk to anybody.

All this was OK - I knew full well what I was getting into. I read documents at real estate closings, and can do basic algebra, and calculate interest. And I figured I could work myself out of it.

And basically, with a serious detour through bankruptcy following the destruction of my delivery business by gas prices following Katrina, that's what I managed to do.

I refinanced the house again last month, paying off my debt from the divorce, getting it into my name only, and going to a 20 year, fixed rate term. At a slightly higher rate than my original, but not nearly as high as my previous mortgage would've bounced to this month. It would've been 11+%, at least.

This cost me a good deal of time and hassle. But I saved the farm - for now. With a little luck and a lot of hard work, I'll manage to get a reduced rate in a couple of years, after my credit recovers and things calm down in the markets.

And now all these fucking bonehead politicians are floating proposals to penalize me for my diligence and reward others for their amazingly stupid investments.

I doubt that any of these proposals will ever be enacted into law - at least I hope not. The one from Dubya borders on moronic: it's merely a "suggestion" to banks to freeze the rates. Others call for taking Treasury funds (read "tax funds") and paying off the banks for the supposed losses they'd suffer when the government mandates a freeze on their mortgage rates.

So, basically, if I'd been a dullard, or just plain lazy, it would've saved me a considerable amount of money (in my newly increased interest rate, and in the costs associated with real estate - appraisals, titles, etc.) and hassle (in getting the refinancing in the first place).

Thinking about taking money out of my paycheck, by force, each week, to salvage banks who made bad loans just adds insult to injury.

Barney Franks has it dead on:

“Talk about moral hazard. We’ve all told people, don’t go any more deeply into debt. Now we’re saying that people who go more deeply into debt will have an advantage over people who don’t go more deeply into debt.”

</rant>

Many homeowners who are having trouble paying their mortgage will find that they do not qualify for the assistance announced by President Bush.

(link) [New York Times]

22:36 /Politics | 3 comments | permanent link