Should the Government Bail-out Troubled Homeowners? – What is Your Opinion?

Well our politicians are diligently trying to make voters believe that they are working to fix the foreclosure problem in America. There is a version of a bill making its way through the system right now.

Now, let’s assume that Congress is going to pass something that will actually help homeowners and help bail them out. Thus far everything that they have done has been somewhat of a joke. It has been all headline and little substance.

Let’s pretend that they are really going to do something that can bail out people in mass quantity. Do you think that is the right thing to do?

One argument says no! The taxpayers shouldn’t have to pay for a person’s decision to sign off on a loan that they knew going into it would be a problem some day and or a house they couldn’t afford. What about the people who have already gone through foreclosure?

One argument says yes! If the government doesn’t do something, this is going to hurt everyone. The consequences will be way too tough on the economy.

My opinion?

First, there is a subset of people involved in this problem that were dealt with fraudulently in the process of obtaining a loan. Although they still signed the dotted line and should have known what they were signing, they were treated in an unethical/fraudulent manner.

This problem has to work itself out without Congress intervention. It is the healthiest thing long-term for our country. Congress just makes a problem bigger in the future by continuing to try and intervene. The taxpayer in either case is going to get hit for this problem. The unintended consequences of this type of intervention could end up being as bad as letting the problem fix itself over time.

The best course of action for our future is to let this problem correct itself. Regardless, it is going to probably be a long time before any type of bill gets passed. By then, the problem will already be way past the point of intervention having a positive effect. We are currently experiencing the highest amount of mortgage resets. The problem will start to diminish towards the end of the year.

The problem is already here and facing millions of Americans. The Titanic is heading for the iceberg. The saddest part of the whole story is that our politicians let this happen on their watch. You could see this problem coming from a mile away. No, it is not hindsight. Loans that are written on 105% of the home, at interest rates that are going to adjust, low initial payments, no documentation closes, etc. have a high probability of crashing.

These were loans written for more than just people with bad credit making this much bigger than the advertised “sub-prime” problem.

What is your opinion?