No. of Recommendations: 3
The real bail out should be for homeowners who got conned into loans they couldn't pay, and the lenders should be forced to refinance in ways that are payable.



I am a very strong advocate for consumer protection and compliance and as a bank examiner helped enforce some of these rules - such as truth in lending, but on this issue I am not exactly sure where you are going with this and think mark presents an excellent argument. Why should his neighbor be "given" half a house for his recklessness.

How many stories have we seen where some one making $40,000 a year is buying $700,000 - $800,000 even MILLION DOLLAR MCMansions. Point is the same - If a person can not afford the house at the current fixed rate payment possibilities he should not be in the house!!

The doctors take IOW - just for some clarification - current possibilities is the lowest fixed rate that the person would have obtained given the same costs of a loan as he paid (then or now).
If some one purchased a teaser rate loan and got charged 2% for the loan - 1% discount 1% origination, then the lending insititution should give him a fixed rate - available to that borrower at that time or now (which ever is lower.)

The reason I would go at that time or now is because there are some home owners who used the opportunity to get into a home, and as a result have improved their credit such that the would qualify for a lower rate now than they would have at origination. Past this - if you can't afford the house at the fixed rate there should be no bail out!

And I do not see this as such a huge problem - it is big but not unsurmountable: An entity where home owners take their loan - some one examines the deal and makes the call - can this person afford this house at this rate?? If yes, then the loan is "paid through" that entity given legal protection against foreclosure, and then payments are passed through to the "securitization." The SPE can not go after the house and must accept the reduced payments.. IF the person can not afford the house at this rate, the entity steps aside! IT can provide assistance through voluntary programs established by some of the financial institutions and there could be some liberal guidelines as to affordability, but the key rests with if the person has been making and is capable of still making the payments on a level risk/reward playing field.
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