Scared of Foreclosure? Try Buying a House you can Afford.
Ok, I will stop posting political posts soon. I know these can be boring, but there are a few things happening right now that really tick me off.
I read one of the greatest articles in a long time. It was from Peter Schiff–oddly enough he was an adviser to former presidential candidate Ron Paul. Let me preface this, Peter Schiff (like Ron Paul) has some very out there ideas. I don’t necessarily agree with his opinion on many issues, but on this particular issue he’s dead on.
Peter says that there was a clear message from the $700bb bailout and both presidential candidates desire to renegotiate people’s interest and principle so they can pay for the house they can’t afford. That message is this: Just stop paying your mortgage. Here’s what Peter says:
…the government’s landmark $700 billion bailout package has an important message for you: stop making your mortgage payments . . . immediately. Furthermore, if you believe that with some planning and sacrifice you may be able to meet your mortgage obligations, the government’s message is clear: relax, don’t bother.
Politicians hate foreclosures. When there is an influx of foreclosures, constituents tend to believe it was their congressman’s/senator’s/insert-your-elected-official-here’s fault. So these elected official feel they need to fix things in order to gain their constituent’s vote. So what they are doing is flooding in massive amounts of money in order to take foreclosure off the table. Banks need to take foreclosures in order to make as much of the principle out as possible. Foreclosures aren’t the enemy here, they let the banks keep from taking the massive losses that close them down. But a foreclosure is terrible PR for a politician.
The message says just stop paying and stay where you are at and after a few months/years of payment free living, someone from the government is going to call you to figure out how to adjust your loan so that you can actually pay your loan. Buying loans is a Catch-22 for the government. If they buy too low it will bankrupt the institutions they have just set precedence for in bailing out. If they buy too high, they will not make anymore and will bankrupt out government. Right now our government officials are banking on hope. They hope that if they sit on these loans long enough, the value of the house will exceed the inflation they’ve caused by this, then they hope they can then liquidate them.
I’m sorry but I’m not hopeful that the government can wish their way into prosperity.
I’m just saying…
