As if the recent $8 Trillion in bailouts is not enough to screw over the American people, the Treasury Department has the gall to consider a lobbied plan that would systematically have mortgage rates reduced to 4.5% or lower. ARE THEY INSANE???
Lobbyists are pushing the Treasury Department to consider a plan to purchase mortgage-backed securities in the hopes of driving mortgage rates to as low as 4.5%.
Similar to an effort unveiled last week by the Federal Reserve, the proposal calls for Treasury to buy securities backed by 30-year fixed-rate mortgages from Fannie Mae and Freddie Mac.
The increased demand for mortgage-backed securities would prompt mortgage rates to drop. That, in turn, would enable homeowners to refinance into lower-cost loans and make it cheaper for potential homebuyers to get into the market.
This plan would not help any of the troubled homeowners, but would rather hurt them and help only the wealthy and other financially stable individuals. The plan sounds good on the surface until you look at its ramifications:
1) There are millions of people without jobs right now, and people losing jobs at a rate of a couple hundred thousand per month. Those people would not be able to refinance. Banks do not loan money on the basis that the house is collateral, they loan money based on the borrower’s ability to re-pay. If people do not have a job, they do not have an ability to re-pay, and therefore can not refinance.
2) This would cause a repeat housing bubble. Many people, including investors and first-time homebuyers (who are not educated enough to know what it takes to be a homeowner), will jump in order to get the low rates, only to be in foreclosure within a few short years as the economy tanks under the Obama presidency (unless of course Obama plans to use the government to bailout homeowners as well).
3) It would help the financially well-to-do be able to invest in tangible real assets. Those who have a the financial wealth to do so will take advantage of this plan. They will buy up real estate at low prices where the values have sunk significantly, with the lowest interest rates in half a century, and then rent the properties at a premium to those who do not have the financial means or credit worthiness to be homeowners themselves. (Not to mention that a large portion of the assets of the wealthy lies in tangible real assets such as real estate).
It seems as if this is another part of the plan for the formation of the Socialist States of America. What we need is the government to stop interferring in the private sector!
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It looks like this plan is only for people purchasing a home (not a Refi), but also needs to be owner occupied, so it would not apply to investors, but it sounds like a horrible deal that is being pushed by the National Association of Realtors. However, it looks to have hurt short term home sales by $4 billion this week:
http://www.vamortgagecenter.com/blog/2008/12/04/4-billion-in-lost-home-sales/
These new low rates will have to be subsidized by the rest of us saps who actually pay for things. You have the ability to pay-then you get a 7% loan, you are poor, then you get a 4.5% loan. Socialist equality home ownership.