We’ve all been reading about the negative impacts all around the United States as a tremendous number of people are going into default on their sub-prime home loans, and they say that the situation is likely to get worse. Millions of American families seem to have overextended themselves, getting into interest-only variable rate loans that are now coming back to bite them as their short-term low rate is now adjusting to a higher one. Clearly many of these folks taking out these sub=prime loans were the victims of predatory lending practices by the "used car salesman" class of mortgage brokers, and many others still are regreting their efforts to ‘game the system’ as rates go up. California being the largest state in the nation, we are the most-impacted by this situation.
Believe it or not, some are advocating a taxpayer bailout for all of these subprime lending companies, and for those who took risks on this loans. Of course, such a bailouot would mean that all Americans are paying the price for the imprudent decisions made by some. Completely unfair.
Assemblyman Chuck DeVore recently published a column in the Orange County Register that speak eloquently as to why this is a bad idea. Here is how it begins…
Which brings us to the subprime lending crisis. Of every eight homes sold recently in Orange County, one was a distressed sale, meaning either a foreclosure or a short sale, where a home is sold for less than the mortgage balance. Up in the San Francisco Bay area, one group estimates that 4,800 subprime loans made in 2006 are likely to fall into foreclosure in the next two years.
No doubt the pain is real for families threatened with the loss of a home. The question for a policymaker is not whether to have sympathy but, rather, whether to use government power to intervene in the free market. Any state intervention in the financial markets will have the effect of punishing those who carefully considered the risks of a loan and acted prudently while rewarding those who failed to meet their financial obligations.
Read the entire column here.
Our friends over at FreedomWorks have put together a great video, which you can see below, demonstrating how Americans do not support such a bail out. You should check it out!
November 2nd, 2007 at 12:00 am
Yes, No bailout!
Although, I do support efforts to beef up predatory lending laws, which should protect the consumers.
I encourage that we be practical on the debate without emotions on this broad issue facing California and throughout the country.