FHA

Today, the White House announced a plan to help people having problems making their mortgage payments now that their once very low mortgage rates have reset to a much higher interest rate. The program outlined by President Bush essentially has FHA insure future loans that are made by commercial mortgage lenders so that distressed homeowners can refinance their adjustable variable rate mortgages to a lower fixed rate mortgage. The FHA insurance serves as a guarantee by the US Government to the Commercial Banks that if their new refinanced loans go bad, the FHA will step up and make the Commercial Banks whole again. In exchange for this gurantee, Commercial Banks will be more open to making more loans out to people who really need access to the loan market but are not unbable to do so because of the Credit Crunch. The FHA guarantee will not be funded from taxes but from a premium that homeowners will have to pay to the government on top of their new refinanced fixed rate mortgage rates.

Okay, so this is not exactly a bailout, thank goodness, but I still think that the White House should stay out of this mess, and let the market dictate what ultimately happens to the economy and to these people who stretched their budget waaaay too far. If anything is to be done, let the Federal Reserve Bank do what they need to do to keep the economy from going into a recession. At least, changes in monetary policies affect everyone and not just a select group of people. I see no reason why the White House should step in and give tax breaks to people who find themselves not being able to make their house payments or who have negative equity in their homes. What about me? Why don't I get a tax cut too? What pisses me off is that these people who are having trouble making their payments are also the people who are responsible for pushing real estate prices up to the stratosphere. I say, let them burn in hell and let the market find its own equilibrium. The only way we will see real estate prices going down is if there is an over-supply of homes for sale, and any fiscal policy that prevents such an event from happening is in my opinion discriminatory. And it also sends the wrong message to the market, that it is okay to be fiscally irresponsible with your expenditures because when times get tough, the US Government will be there to bail you out. Come on!! I'm outraged!