Friday, September 12, 2008

What is the difference in rescuing homeowners...

What is the difference in rescuing homeowners from foreclosure as oppose to bailing out the banking institutions that made the bad loans to those who are losing their homes? How do we justify using taxpayers money to prop up financial institutions that are going under because of bad choices made by their CEOs? Why is not Congress investigating the Officers of these institutions with an eye toward prosecution? I have been asking myself these questions and more and here are my thoughts.

It would seem to me that if everybody was able to make his or her mortgage payments that we would not have this situation to began with – think about it! What if we retool every loan that was an ARM and automatically re-financed it for a fixed rate loan? And suppose we also re-negotiated the terms of the loan so that the loan payments could be reduced by extending the length of the loan – a thirty year now becomes a forty-five year loan. Suppose we instructed all banking institutions to exercise flexibility with each of its customers that are delinquent in terms of making it possible for that customer to keep his home. Of course, the person that has lost his job is without hope of being able to pay his mortgage, and as such, would not be a candidate for recovery.

If we did all of these supposed actions, or some of the supposed actions, then banks would continue to get money from their marginal loans and the banking institutions would gain time to bring this situation under control without the help of the government. What is causing the problem for everyone is the number of people that are not paying because the loan payment has escalated beyond the amount of money that they are making per month.

Bailing out the financial institutions is hopelessly impossible to fathom when you began to realize that these institutions will still have a list of properties that they will need to dump at less than value. How will the Treasury Department regain the money that was extended to these banking institutions in a vain attempt to rescue them? Why not let the owner keep the property and pay you something rather than repossessing the property with no further recourse to the shareholders of the bank/financial institutions?

For sure, the culprits in this grand scam are the banking institutions themselves. I am not so old as to not be able to recall this same situation occurring in the real estate industry of Japan. How did the Japanese get a grip on the disaster that they erected for themselves – they realized that saving the institutions was not the problem? They refinanced all of the loans of these over-appraised homes so that the responsibility for repaying the loan extended into the second, third, and in some instances, the fourth generations of families. That simple solution stopped the hemorrhaging of their banking institutions.

Congress, are you listening?

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