by Nancy Osborne, COO of ERATE®
Dec 10, 2008 - Shortly after the government announced yet another, in a seemingly endless stream of bailout programs meant to prop up the free-falling economy, the question was asked as to whether or not this particular program aimed directly at assisting homeowners (AKA the taxpayers) would actually end up supporting or rewarding their poor decision making.
The program being launched is designed to aid borrowers who are 90+ days delinquent in making their mortgage payments. The fact that this paradoxical question is being raised seems somewhat surprising after all in each of the proposed bailouts, or if you prefer the politically correct term, rescues, irresponsible behavior is rewarded.
So far much of the irresponsible behavior being rewarded is that of Corporate America's, its Wall Street investment firms, banks and insurance companies (AKA the folks that got us into this mess in the first place with the misguided securitization process along with their corrupt financial incentive systems).
Both GSE's Fannie Mae's and Freddie Mac's irresponsible behavior is being addressed at the taxpayer's expense as well. Doesn't it seem only fair that the taxpayers themselves should be rewarded for their own bad decision making with a bailout as well? After all it is their money that is being used to prop up all the others.
True, the government contends it's not a bailout and that the taxpayers will receive a return on their investment in the end but seeing is believing and it seems very unlikely that a massive government divestment of bank and insurance stock is going to occur anytime in the near future.
It seems far more likely that exactly the same folks being “rescued” now will come back with their hands out for more. And let's recall that just prior to the period of the summer of 2007 when the problem with mortgage-backed securities first starting coming to light, our government was investigating steroid use in baseball, yes baseball.
Talk about asleep at the switch, few in Congress or at the White House did anything to stop this mess from unfolding and in fact did much to facilitate it with excessive deregulation or a total lack of regulation altogether in many areas such as the derivatives market and a failure to place constraints on Fannie and Freddie due to their egregious lobbying efforts of Congress.
Exactly whose bad behavior isn't being rewarded in this unprecedented disaster? Has anyone involved even been brought up on charges let alone faced trial yet? Taxpayers footing the bill for this mess, rather than being excluded from participating, should perhaps be at the top of the bailout list. After all isn't it the default on the mortgage payments which sets the whole chain reaction of problems in motion. In fact this remedy may have been the cheapest, quickest and most cost effective way of mitigating the damage to all parties involved in the first place.
Nancy Osborne has had experience in the mortgage business for over 20 years and is a founder of both ERATE, where she is currently the COO and Progressive Capital Funding, where she served as President. She has held real estate licenses in several states and has received both the national Certified Mortgage Consultant and Certified Residential Mortgage Specialist designations. Ms. Osborne is also a primary contributing writer and content developer for ERATE.
"I am addicted to Bloomberg TV" says Nancy.
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