Schumer wants government bail out for those in foreclosure… WHAT?!!
I know this is old news, but I just had to put in my 2 cents. 
Ol’ Mr. Schumer in New York is trying to bring out the proverbial life raft for borrowers in foreclosure and the subprime banks who are the “victims” of the recent rash of defaults (like the nifty graphic I whipped up? —–> )
Schumer and some non-profits have dreampt up a “solution” that will help these poor borrowers and banks get out of their dirty situation with new lower interest rate loans funded by hard working American people like you and me. According to a CNN Money article, this program is asking for hundreds of millions in government dollars to help fund this program.
Here’s my take on this little misguided brain fart by Chuck.
IT’S COMPLETE STUPIDITY BASED ON NO SOLID ECONOMIC FACT!
I find it all and well that Schumer wants to help the people and companies affected by the rash of foreclosures. They say that they are trying to help those who are victims of “predatory lending”… but how do you screen out the very small percentage that are actually true victims of this type of lending from those who are just plain stupid and didn’t use their noggins? You really can’t.
So… once again… the people who are responsible and make rational decisions are footing the bill for those who got caught up in an emotional purchase or just plain didn’t do their own due diligence before they signed the loan docs. One aspect of this that really pisses me off is that this program is designed to give these borrowers in default new loans with interest rates 1 percentage rate lower than what you and I can get in a for profit bank! This is basically a welfare program for people who had every opportunity to make the right decision early on.
Here are my top 6 reasons the Chuckie bailout idea is dumb… dumb… dumb:
- 1. Since when was it a good idea to bailout someone already in default with more debt? The problem isn’t the interest rate… it is the person taking out the loan.
- 2. The re-default rate on these new loans will be between 25 and 60% just like other government programs that already attempt to do this… but on a smaller scale. Once again… it’s not the loan that is the problem. America’s infactuation (and desensitization) with debt and credit are a lot to blame
- 3. People and companies need to go through the school of hard knocks to truly learn a lesson. Remember back to when you were a kid and your parents paid for that little fender bender you got in? Did you learn as big of a lesson than if you had paid for it yourself? Of course not!
- 4. This is all part of the big recorrection that the housing market and economy have… are… will… whatever… go through. These borrowers shouldn’t have been able to buy a home in the first place… so they are just going back to where they were… and the lenders are taking it in the shorts for getting a bit greedy and handing out loans like chai teas at Starbucks
- 5. Bailouts like this are temporary and tend not to stick. Subprime borrowers are subprime for a reason and this program just throws good money after bad (for the most part)
- 6. This sets a terrible example and just follows in the footsteps of the airline bailout of a few years back. So… is the government supposed to bailout everyone who makes a stupid decision, runs a bad business, or everyone who is given mis-guided advice? Continually bailing out people who make mistakes only leads to unlearned lessons and repeated history
So… what do you think? What are your thoughts on the proposed subprime bailout? Do you think you should have to pay to help bailout the borrowers and companies who are at the root of the foreclosure problem? I sure don’t think so!
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Hey, my name is Trevor and I'm the founder of The REI Brain and a real estate investor since the age of 21. Right now, my focus in real estate investing is multi-family income properties and I have plans on moving more into the commercial real estate investment world in 2008 and beyond. 
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