Don't Call It Socialism
How many of you knew this was in the Bailout Bill?Durbin tells us Uncle Sam is now the biggest player in the housing market:
Sen. Dick Durbin, the Senate’s No. 2 Democrat, immediately called on the federal government to enact an aggressive loan modification plan in a letter to Secretary Paulson and other officials. “The federal government now owns or has a controlling interest in a large percentage of the outstanding mortgages in America,” Durbin wrote. “With that control and influence comes responsibility.”
What can the government do with that new “control” and “responsibility”? Well, turns out, quite a lot:
Section 109 of the bill is entitled “Foreclosure Mitigation Efforts.” It orders the secretary of the Treasury to “implement a plan that seeks to maximize assistance for homeowner.” It lists as means the secretary can use for doing this: “term extensions, rate reductions, principal write downs, increases in the proportion of loans within a trust or other structure allowed to be modified, or removal of other limitation on modifications.” Section 110 of the bill is entitled “Assistance to Homeowners.” It orders other federal agencies to ease the terms of mortgages the federal government purchases if the borrower is at risk of foreclosure… It specifically lists interest rate and principal reductions as tools federal agencies can use to keep people in homes they otherwise cannot afford.
Reaction to these sections of the bailout: “In my mind, they’re trying to go back and rewrite the mortgage contracts,” said Connel Fullenkamp, an associate professor of economics at Duke University… “This is a contract between the bank and consumer,” said Ritch Workman, of Workman Mortgage Co. in Melbourne. He is the president of the Florida Association of Mortgage Brokers. “Who is going to invest in America if they think the government will one day change the rules?“
Supporting Link: 'Rescue' Rewards Housing Hustlers
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