By JLP | February 27, 2008
The housing and mortgage crisis is quickly becoming an all-out bailout funded by responsible taxpayers.
I’m scratching my head trying to figure out what exactly our government is trying to do regarding the mortgage crisis. Today’s Wall Street Journal had an article ($) detailing Barney Frank’s (or is it Barney Fife?) plan:
Barney Frank (D., Mass.), the chairman of the House Financial Services Committee, is floating an initiative that aims to refinance as many as one million “distressed” homeowners out of high-cost loans using government assistance. The proposal, which could cost as much as $15 billion over five years, would likely involve the federal government buying loans and then helping move borrowers into mortgages backed by the Federal Housing Administration. Certain loans, such as investment properties and those on vacation homes, wouldn’t qualify.
I’ve said it before: unless we give the houses to these people, there’s no way they will be able to afford the payments. Lots of homes (though not all) were purchased using interest-only mortgages. The interest portion of the payment was LESS than the portion that went towards the principal. So, even if you refinanced into a mortgage with a 0% interest rate (which isn’t going to happen), these folks’ payments would still go up.
Though I disagree with Barney Frank’s plan, it’s this part of the article that bothers me the most [emphasis mine]:
The program might be less costly if the housing market improves or if the borrowers with government-backed loans are able to handle their new mortgages. Mr. Frank is also working on a provision that could limit the government’s potential exposure, but in an interview he defended a federal role in stabilizing the housing market. “It was the lack of government intervention that got us here,” he said.
Sure, that’s the answer: MORE government regulation! Give me a break!