The Politics of the Warm Fuzzy Mortgage
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If mortgage lenders are all so "greedy," then why should the federal government try to emulate them?
Buying, selling, repackaging and servicing mortgages is precisely what all those "reckless" financial companies (i.e., the ones that Democrats love to damn nowadays) have been doing all this time. The notion that the federal government needs to get in on the action, to the tune of $20 billion, has no rational basis -- especially from a Democratic worldview.
If there is a way to buy up distressed mortgages and restructure them to avoid foreclosure, then the private sector can and will do so. (Remember, contrary to the "Silas Barnaby" stereotype, banks do not enjoy foreclosing on properties -- they enjoy getting mortgage payments, even restructured ones, in full and on time. Banks will in fact bend over backwards to avoid foreclosure -- assuming that the debtor isn't a predatory borrower or other deadbeat and is actually interested in "working something out.") If there is no way to do this profitably, meanwhile, then Dodd is lying and his scheme becomes just a more complicated form of bailout for defaulters.
It's Amtrak all over again: Politicians using the fact that not enough people want a service as grounds for going right ahead and providing it anyway. The mind reels.
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On the other hand, there are worse ideas than Dodd's.
Sen. Christopher Dodd said he envisioned an entity with an initial capitalization of $10 billion to $20 billion that would buy distressed mortgages and pass on the "discounts ... to homeowners in the form of new, lower-balance mortgages."This is, of course, utter nonsense.
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"The difference between the old mortgage and the new mortgage would be sufficient, after initial capitalization, to fund the program and cover possible losses," the Connecticut Democrat said in the letter.
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Dodd's proposal is aimed at helping millions of Americans facing the risk of foreclosure.
Buying, selling, repackaging and servicing mortgages is precisely what all those "reckless" financial companies (i.e., the ones that Democrats love to damn nowadays) have been doing all this time. The notion that the federal government needs to get in on the action, to the tune of $20 billion, has no rational basis -- especially from a Democratic worldview.
If there is a way to buy up distressed mortgages and restructure them to avoid foreclosure, then the private sector can and will do so. (Remember, contrary to the "Silas Barnaby" stereotype, banks do not enjoy foreclosing on properties -- they enjoy getting mortgage payments, even restructured ones, in full and on time. Banks will in fact bend over backwards to avoid foreclosure -- assuming that the debtor isn't a predatory borrower or other deadbeat and is actually interested in "working something out.") If there is no way to do this profitably, meanwhile, then Dodd is lying and his scheme becomes just a more complicated form of bailout for defaulters.
It's Amtrak all over again: Politicians using the fact that not enough people want a service as grounds for going right ahead and providing it anyway. The mind reels.
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On the other hand, there are worse ideas than Dodd's.
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Posted by Kip on
23 January 2008
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