Subprime Mortgage Holders get Bailed Out? I think NOT!

I was scanning the morning paper today (Dallas Morning News) and found an article in the business section called "Defaults stirring debate."

The gist of this article is that many "Activists" (read Busy Bodies) want the government to step in and help the poor downtrodden folks who took out subprime adjustable rate mortgages a few years ago. Those loans are now starting to adjust, and people cannot afford the higher payments, so many home are being foreclosed upon and the home owners thrown out. And of course, the leading Democrat presidential hopefuls and jumping on this band wagon and blaming it all on President Bush.
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A Side Rant:

Have you noticed that EVERYTHING that happens in the world these days is ultimately George Bush's fault? That is one amazing man - he is capable of controlling the weather (Hurricane Katrina & global warming are his fault), every despot & madman in the world (Iraq, N. Korea, Iran and Afghanistan are his fault) and just about everything else. Wow – and we elected him President? What were we thinking??

Now back to today's regular rant.
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For those of you who don't know, a subprime mortgage is the kind that people get if they have bad credit. It has higher interest rates than "A paper" or "normal" mortgages.

And, an adjustable rate mortgage is one that has one (lower) interest rate guaranteed for a short time (for from 1 to 10 years), and which after that guarantee period "Adjusts" to a different rate (the new rate depends on the type of loan and the market rates, but is usually higher).

So, these days, many people with crappy credit who bought homes a few years ago are now getting hit with interest rate adjustments that make the house payment too much for their budget. Many of these home owners are having those homes foreclosed upon.

And the government should bail them out???

No freakin’ way! Has anyone ever heard of PERSONAL RESPONSIBILITY?? You know – actually acknowledge your own mistakes and fix things yourself?

Nope, didn’t think so. Not anymore. Not in this country.

ALL of the people who took out subprime loans knew their credit stunk – their lender told them if they didn’t know it before. And, any respectable lender told them this:

“I can get you into the house you want, but the interest rate will be high because of your credit situation. The lowest rate I can get you is __%, and this is on an adjustable mortgage. This rate will be good for __ years, and after that it will go higher. This gives you __ years to clean up your credit. Once your credit is better, you can refinance your mortgage into a better loan with a lower rate. But, you have to clean up our credit first.”

Yes, there are predatory lenders out there who take advantage of uneducated borrowers and give them bad loans, or loans that the borrower really cannot afford. There are way too many predatory lenders, and they need to be caught and punished. But, guess what? The Feds are after these people and are prosecuting them.

And, look at it this way. If a mortgage bank lends money to people who default on the loan, the mortgage bank LOSES money. They do not get the loan payments, they do not get the servicing charges, and they now have a house for which they have paid, but for which they are NOT getting a return on their investment. Do this too much, and the bank goes out of business.

Notice in the news lately all the stories about subprime lenders going out of business? Hell, the stock market drops lately have been blamed, at least in part, on these companies going belly-up. This is what happens in the capitalist marketplace when a business is run poorly. It stops running at all.

So, don’t blame the banks for stupid loans – they will get theirs in the end. You can blame unscrupulous Mortgage Brokers for taking advantage of the poor, poor consumer who does not know better.

Again, for those who don’t know, a Mortgage Broker shops your loan to many mortgage lenders to find you the deal you accept. A Mortgage Banker lends you money directly from his company. The Broker charges you a fee for finding you the loan to accept – and sometimes the fees are outrageous. Unscrupulous Brokers will certainly take advantage of you if they can. Yeah, yeah, the Mortgage Banker can take advantage of you too, but typically the Banker is under many more restrictions that limit his ability to rip you off.

BUT!!! Ultimately, it is the consumer who needs to look out for him or her self. Caveat Emptor (Buyer Beware) is really true. TAKE RESPONSIBILITY FOR YOUR OWN ACTIONS – no one else is responsible but YOU.

No one forced people with lousy credit to get lousy credit.
No one forced them to spend too much on credit cards and fail to pay the bills, or to run out on debts.
No one held them down and forced them to spend beyond their limits.
No one made them buy a house they cannot afford, or to spend more than they make.

I know there are some people who get in financial trouble through no fault of their own, but they are the exception. Most people with crappy credit did it to themselves, and have no one to blame but themselves.

And the government has no call to bail these people out. If the people who got the subprime loans originally did not make the effort to clean up their credit and financial situation when they had the chance, then so be it. To mangle another cliché – they made their beds, and now they can move the beds along with all their other stuff out of the houses they no longer own.

And, Hillary Clinton & Christopher Dodd – stay out of it. It is not your business and pandering to the people who lost their homes this way will not garner you any more votes. The nosy jerks (activists) who want the government to step in are already going to vote for you anyway.