AKJ

Hitting the Reset Button On Home Mortgages

Everyone gets up in arms about bailouts and the unfair treatment of irresponsible buyers until they start looking at what a wave of foreclosures does to their own property value. Just look at California - that state has more Jumbo mortgages than every other state combined. Very responsible buyers have to finance $500-750k on their first home purchase to get a reasonable home in most cities. If you collectively let everyone in California foreclose who is currently or soon will be in default or delinquent on their mortgage, you will wipe out hundreds of billions of dollars of property value. Whole towns will be abandoned as home values drop below mortgage balances and owners have no incentive to stay current on their loans. Property tax revenue will plummet. Consumer spending will grind to a halt. Personal bankruptcies will skyrocket. City and county governments will start defaulting on their bonds. Insurance companies (mortgage, bond and property) will go under as claims exceed reserves. This is why the Fed is fine bailing out "irresponsible" borrowers - because it saves the system for the rest of us. So boo hoo - you may not get the break your neighbor got. Irresponsible people get government help all the time - the US is fairly frugal on this compared to most Western countries. This would be the least wasteful assistance ever offered. Your home is most likely your most valuable asset - to see it marked down 20-30% in one year because your neighbors went into foreclosure will not make up for the fact that everyone got a fair deal and the US Government spent a few billion less than they could have.