McCain's Mortgage Plan

[panda29]

Why would anyone pay there Mortgage who owes more than the current value ?

 

[smelter]

^ The current value of a house is not static. If there's a reasonable expectation that values will rise in the future, there's a case to be made for severe belt tightening and delaying a mortgage default as long as possible.

 

[Telstra]

who is so cute? Are u talking about McCain or Josh ?

 

[Spiff]

Why would anyone pay there Mortgage who owes more than the current value ?

^^^^
This is one reason why we're in this mess. Too many people think if they get a mortgage that their home value is guaranteed to skyrocket forever. And they think that their financial situation will be completely stable until retirement.

But a mortgage is a contract. So if they don't pay, they lose their home. Sounds harsh to some, but that's the nature of the American dream. Although wouldn't it be dreamy if the government gave away expensive homes to every family for free?

 

[smelter]

^ a home in the Hamptons would be nice!

 

[PabloZed]

CNN doesn't do the best job of explaining it, but they at least reach the correct conclusion. A better way would be to use some simple math. Homebuyer A paid $300, 000 for a house and Big Bank holds the mortgage, but the house is now only worth $150,000 and Homebuyer A can't or won't pay anymore. McCain's plan says Uncle Sam will give Big Bank the full $300,000 and then give Homebuyer A a new mortgage for only $150,000. So Big Bank gets bailed out, Homebuyer A gets bailed out and the taxpayers get stuck with the $150,000 bill.

There are some other big problems with the proposal, the first being McCain's estimate. The value of properties that would qualify for his plan is about $700 billion (which is why that was the amount Paulson requested).

A second problem is that the plan puts Uncle Sam in the bad mortgage business, meaning the gov't would have to collect rent/mortgage payment from people we know can't or won't pay. That is crazy.

Finally, what happens if property values fall even more as predicted. Does Uncle Sam renegotiate his own loans, taking another loss at taxpayer expense?

In the coming debate Obama needs to point out the obvious inconsistency in McCain calling for a spending freeze and proposing to spend $300 billion in for yet another bailout.

 

[NickCole]

Why would anyone pay there Mortgage who owes more than the current value ?

Because they've made a commitment to do so.

People of character honor their commitments.

 

[TX-Beau]

Has there been some great movement of people just up and deciding not to pay on general lack of principles?

Silly me, I thought those people couldn't meet their payments. I had no idea they stopped paying for shits and giggles.