Lets get one thing straight first, once you cut a check to the IRS and they cash it, it’s no longer your money but is the property of the Federal Government. We have elected officials who we assume will be working for all Americans, and they control the purse strings and what they choose to fund with those tax dollars.
I am of the opinion that we are not bailing out certain individuals who cannot afford their mortgages any longer, instead the people who are actually benefiting from any bailout are the banks who would be left holding a property they can’t sell, one that they will have to pay for exterior maintenance, or interior upgrades, taxes etc. . Then they face the fact that for every 6 months that property stays vacant, they lose appx. 5% of the assessed value of the home. Had we, the taxpayer not intervened to save not only the home owner, but the builder, the banks and others involved in the transaction , the housing picture would indeed look much bleaker. The bailout of individual home owners not only saved them, however temporary, but also their neighbors who wouldn’t see their property values decline because every other home on the block is vacant and it benefits their local communities in the form of property taxes collected.
The Fed has/had difficulty in analyzing the language and figures of these mortgages, These are people with extraordinary math skills and they have had well over a year to study and break down the figures and language and they are still no closer to understanding any of it.! That being the case, how or why can you blame anyone for defaulting on their loans?
The housing boom that created this mess is solely to blame for our economic turmoil, I offer up an example. In the state of Iowa over the last 5 years has had a positive population growth of around 1.5%, new housing start ups came in on avg. at 5%-8%, that means from 3.5% to 6.5% of new houses had no buyers and were sitting vacant. Which means that builders and bankers were left holding the proverbial bag. They had to get rid of their baggage! Most people who had good credit had already purchased a home, so who would the banks and lenders market to?, The X factor kicks in, There are only X amount of people eligible to purchase $300k homes based on current income levels, that market was gone.
So, bankers and lenders became the serpent in the tree, offering apples to Adam and Eve, the last chance to pursue the American dream, buy a home for less than you are paying in rent !, We fail to recognize the effectiveness of advertising, they do it ’cause it works and boy did it ever work. But it covered the banks butt, and that’s all they were looking for, that, and to pass the risk on to someone else .
When the stuffed shirt with the PHD tells you that you can afford this home, and your non PHD instincts say “no way”, Which way would you bend, ? I’ll bet that you reach for the apple!