One of the criticisms the public seems to be making of the bailout is that it is focused on bailing out the greedy on Wall Street and does not do enough to address the issue of the people. What is the issue of the people you ask...helping them avoid foreclosure. Here is a quote from CNN/Money about the final bill:
"In Sunday's version of the bill, federal agencies holding mortgages and mortgage securities would be required to identify loans that could be modified without causing big losses for taxpayers. However, exactly how that would be done isn't totally clear."
This is the underlying problem for the consumer. There is no clear path on who will get helped or how. It will be interesting to see what the end result is for people facing foreclosure. I am seeing some lenders drop interest rates to as low as 2.5% for 5 years to keep people in their homes. At the same time I am seeing other lenders tell their clients "tough ___" and taking their homes. These two people may have identical circumstances but may get opposite results. When the FDIC took over Indy Mac they temporarily froze foreclosures and are reportedly modifying 25,000 loans (rate and/or principal balances).
I am not here to agree or disagree with loan modifications. I will say that I do think many people were put in the wrong loans and need something to happen in order to keep them in their homes. I also believe that others are in over their head with our without a modification. Finally, I believe some good people made good decisions at the wrong time. I do think it is unfair that the standards are different based on the loan servicer and the investor; now it will also depend on the lenders participation with the bailout.
Regardless it will be interesting to watch. What are your thoughts?
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