Posted by
Jason Smith on Friday, September 19, 2008 3:38:41 PM
The moral of this story: Government is not the entity best equipped to handle economic challenges.
Our lawmakers spent more than a year fighting about how to address the subprime lending crisis, and came up with a "comprehensive reform bill" (they love that work "comprehensive"). The trouble is, the lenders are saying, "thanks, but no thanks". Why? Because it was a joke to begin with.
Congress' housing rescue plan, passed with overwhelming support and signed by President Bush, allows homeowners to refinance with a new loan written at 90% of the home's current market value. Their lender would have to agree to it, and the FHA would back it. Sounds great, right? Wrong.
Lenders are overwhelmingly rejecting that as one of their options, and electing instead to work the problems out themselves. Why? Because they have investors and shareholders to protect, and because in most cases, the borrowers wouldn't qualify for the program anyway. They are opting to modify the current loan to a lower interest rate, hoping that when the market values return to old levels, they'll be able to recover what is actually owed on the note.
Private industry will always come up with better solutions than government.
The following is an interesting story about this issue:
http://money.cnn.com/2008/09/17/real_estate/Hope_for_homeowners_hearing/index.htm