According to a recent survey, the majority of Americans are against a mortgage bailout plan.
And for good reason.
A government led bailout would be unfair and costly to American taxpayers. It is unreasonable to ask people who made prudent financial decisions to pay for those that did not. What’s more, a bailout could never be large enough to stop the impending home price correction and the effect it will have on the economy.
Current home prices are disconnected from fundamentals. It is not right for prices to be so far beyond the level of affordability in so many different areas–it is only natural that these prices correct at a later date.
Paulson’s idea to freeze mortgage rates on adjustable-rate loans before they reset will not stop the inevitable correction, nor will it help the record number of borrowers who are in trouble.
The majority of subprime borrowers are not falling behind because rates are resetting; they are falling behind because they bought more house than they could afford.
Many experts predict this plan will not save nearly enough homeowners from foreclosure. Therefore home prices will drop about the same as without the plan.
