10 DEC 07 / "Bush's Bailout"

President Bush's decision to intercede on behalf of subprime adjustable rate mortgage holders is flies in the face of the free market principles Republicans typically espouse.

bad decision to use taxpayer money to bail out distressed homeowners with subprime adjustable rate mortgages / home loans is a mistake. While some people don't consider it a bailout per se, the stock market surely reacted as though it was and financial experts and economists consider it a means of stabilizing the housing industry.

No doubt it was a political decision by the president to appear to be doing something about the housing crisis just before an election year, but

freeze interest rate on adjustable rate mortgages for 5 years. Some Democrats will likely seek an expansion of that time period.

Protecting people from their own mistakes only encourages more mistakes.

The president is attempting to keep these individuals in their homes and making payments on their mortgages because the incentive definitely exists, if a home's value falls significantly below the value of the mortgage, to intentionally default on the loan, particularly if there was no down payment. That way, homeowners don't realize the loss on the home; although their credit rating is negatively impacted.

The natural forces of the housing and mortgage markets must correct the current problems in those industries, not the intercession of the federal government. The federal government can no longer afford to rectify the mistakes of its citizens. The idea that these individuals had no idea that their rates might be adjusted is disconcerting. What part of 'adjustable rate' don't you understand?

Real estate is an investment with the same risks and rewards / the same profit and loss as any other investment.

Intended to rule out real estate speculators because only applies to owner-occupied

The details of the president's plan also involve financial counseling and refinancing opportunities for approximately 1.2 million homeowners. Federal Housing Authority, Fannie Mae, and Freddie Mac might become more involved as the situation warrants, shifting refinancing costs to the American taxpayer. According to the Wall Street Journal, only a select group of 100,000 to 300,000 individuals who qualify for a 5-year freeze on mortgage rates will receive financial assistance under the president's plan. The freeze effectively resets mortgage rates at a level below what was initially agreed upon with the lender.

Plan doesn't help those who bought at the wrong time or who necessarily have ARMs. Instead, it targets those mortgage holders have a credit rating below 660.

Sends the wrong message. The 'safety net' is there for the truly less fortunate, not for real estate buyers who made bad financial decisions.

Not surprisingly, this raises the possibility that people will act to reduce their credit scores in order to qualify for the rate freeze.

freeze or refinance.

Corrections are painful, but necessary for the long-term health of the economy. The federal government should not buttress the American economy. It is strong enough to stand on its own.

Individuals who can't make their low payments now don't qualify for the freeze. It is designed to help people that won't be able to afford their payments after their adjustable rates rise.

rewarding poor judgment on the part of lenders and borrowers.

Subprime borrowers generally pay 7 to 9 percent interest, but those with ARMs can jump as high as 11 percent after a couple of years, which translates in several hundred dollars per month. Many people can't afford the higher payments per month and default.

And, of course, the Democrats are dissatisfied the the extent of the president's response. They want more government aid.

Lenders weren't required to provide loans to individuals they knew couldn't afford them.

Which in the end will continue to support unnaturally high real estate prices, particularly in areas like northern Virginia, which saw homes in some communities rise more than $100,000 per year. The area is still artificially high, giving first-time home owners no opportunity to raise a family in the suburbs of Washington, DC.

As a conservative, I have been displeased with the president's signatures on the legislation for no child left behind, the farm bill, campaign finance. This appears to be another time where the president has been cowed into action by the political pressures on the left. To at a minimum give the impression that he is trying to do something to alleviate the pain. Pain is a great teacher.

The plan buttresses subprime mortgage lenders because it ensures fewer people will default on their loans.

Government cannot always come to the rescue. Although the Katrina aftermath could have been handled better by goverment at all levels, unreasonable expectations unfortunately led to the widespread impression that the goverment had failed the people of New Orleans and the Gulf coast.

Financial markets only work if contracts agreed upon in good faith are adhered to.

The president plan essentially overwrites the contract.

in the free market economy of the United States, however, lenders and borrowers can renegotiate on their own. Lenders are motivated to keep the homeowners in the house so as not to incure the average $50,000 in foreclosure costs.

The plan attempts to lessen the impact of the U.S. housing slump on both lenders and borrowers. It stipulates that borrowers will be able to refinance existing mortgages at a lower rate, refinance into a mortgage guaranteed by the Federal Housing Administration, or freeze the loan's rate at the introductory rate for five years.

It applies to borrowers who took out mortgages between Jan. 1, 2005, and July 31, 2007, and those that would face a payment increase of 10% or more on their first reset.