Bail out the banks? NO
Bail out the consumers? NO AGAIN
Help People To Help Themselves? YES !
If the government wants to spend money, then let’s spend it wisely. First let me say that if a homeowner is significantly underwater, then no plan would help them unless they want to live in the home for about 10 more years. We need to develop a plan to help people who can help themselves. Those people include individuals who are…
1. Near, at, or just over 100% LTV and are looking for a lower payment to stay afloat.
2. Falling behind on their payments right now.
3. About to buy a home but have concerns about their consumer debt and what could happen to them if they add a mortgage payment into the mix.
Bailing out anyone (bank, homeowner, etc) does not fix the problem. In similar fashion, bailing out a leaky boat is temporary and does not fix the leak.
Buying a home is an investment decision that comes with some risk. It is no different than buying stock. If the value of the stock declines, you have to hang in there and wait it out or take a loss.
Possible Solution
I am typically not in favor of making government larger, but in this instance it may be necessary.
We need to set up a government credit assistance agency. Consumers would voluntarily enroll in the assistance program. At that time, the govt would pay off mortgages and consumer debt. Consumers would make one low interest (tax deductible) payment to the agency. During the program, they cannot apply for any additional consumer credit unless it is done through the agency and monitored.
Benefits – Consumers will bail themselves out with hard work and cannot get themselves deeper into debt. They will also learn about being fiscally responsible and how to live within their means.
This is not mandatory but a voluntary program.
Does this sound extreme? Yes it is. However, how much worse does it have to get before we take extreme measures?
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