I have been trying to get my head around the bailout and the mortgage mess I have a feeling that some people who read this blog and the guy who created it, understand the financial industries better than I do; but my take on it, is that the mortgages are tied to assets that exist just not at the value they were at when the mortgages were issued.
Many people bought homes planning on them increasing in value and probably paid a premium for them, also people probably used loans they didn’t understand, to buy these homes. I know when I bought my home the mortgage people kept pushing interest only loans, the sales pitch was “they give you the most flexability” or “over time they consistantly have the lowest interest rates” I got a fixed rate and I sleep better because of it, but is sounds like many people went with the interest only loans, maybe that is why Ambien has been such a success.
I don’t see how buying all these mortgages at inflated prices fixxes the problem. People are still stuck in houses that they bought not because it was a place they wanted to live, but because it was a place they thought would make them some money. People will still have mortgages that the principal balance never goes down and in some cases increases every month. It doesn’t matter if the bank owns the loans or the government the loans homeowners situation is still bad.
It seems like it would make more sense to set up an agency for people who want to stay in their home, where they can get a low fixed rate loan up to the amount of the other loans on their home, regardless of their credit score; or some other plan that allows people a chance to keep their home but lets the speculaters on both sides of the issue pay the price for speculating in the wrong direction.
The other thing about the bailout is why not wait until after the election, right now either John McCain or Barack Obama will be the next president and we will know which one in 40 days. Why not wait until we know who will be the next leader of the country before we rush into a solution that may have long-term effects and hamstring the next president for their entire first term.