Evidently, Congress and the White House are working together to bring "moral hazard" to new heights...er...depths. How so? Well, they're planning to prevent the underwriters of adjustable rate mortgages from adjusting the rates for a period of five years.
While certainly the holders of these mortgages will appreciate the lower payments, the "sob stories" say something different. One example; a 73 year old woman loses her home because of an ARM mortgage foreclosure. Say what? Bankers are issuing adjustable mortgages to people on (presumably) fixed incomes?
In other words, the very examples used to demonstrate the problem of ARM mortgages make very clear that the main problem is that lendors and borrowers are forgetting basic principles our fathers and grandfathers knew about debt; mininum down payments, being able to pay the "worst case" with one's current income (or less), and so on. The bailout simply tells lendors and borrowers that these principles don't matter, 'cause Uncle Sam will come and save the day.
Be prepared for another mortgage crisis in about ten years as a result, and get ready for Uncle Sam to pick your pocket to save the bacon of those who issued foolish mortgages.
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