I’m gonna get a little boring and political today. I ran across this article in the Chicago Tribune by economics professor Casey Mulligan at the University of Chicago that made a light bulb go off in my head… the freakin US Treasury and Bernake are proposing a wacky welfare program as a solution to the mortgage crisis.
The new Streamlined Modification Program set to launch December 15th to be based on 38% of a borrower’s income proposed by Bernake makes failing to find a new job the best course of action. Any rational thinker would agree that now is not the time to have a 38% tax hike, but that’s precisely what Fannie, Freddie, the FDIC, and now the US Treasury are forcing banks to operate in the future. The banks wills gladly do this because collecting some bad debt is better than collecting nothing and that means more money in their pocket.
Here’s the hypothetical example Professor Mulligan provides: You and your spouse were both employed in 2005, at which time you bought a house, took out a mortgage equal to four years’ family income and committed to a monthly payment about one quarter of your family’s monthly income. Today your house is worth three year’s income. To add to your injury, your family income is cut in half because you lost your job. Your housing payment is now more than half of your family income. Your best course of action may be to fail to find a new job. Citigroup Inc. is your mortgage lender, and (as part of the Treasury rescue deal) is willing to renegotiate mortgages with people in financial trouble and limit their monthly housing payments to 38 percent of the family’s monthly income. With you unemployed, your family income is low enough that you qualify for this loan forgiveness. If you find a new job quickly, you and your spouse will no longer qualify.
All I have to say is no one’s bailing me out and they want us to pay for those who are too lazy to pay. That’s retarded and irresponsible of the government for rushing into a haphazzard solution.