Citizen Chad's solution to the mortgage crisis
You may have heard or read that the U.S. Government is expected to take over Freddie Mac and Fannie May, the two mortgage giants (who own 50% of the mortgages in our country). Who is going to pay for this? You and me. Yes, it's us who will pay for the irresponsibility of the so many people in our country who took out risky mortgages.
Most of them probably had responsible friends & neighbors who warned them that the loan was risky, but that advice went unheeded. It's possible that some people didn't receive any warning, being swindled by a mortgage agent who specifically did not tell them about the risks. I still think that person has a lot of responsibility, because surely they understand that $x,000,000 is a lot of money, and they are expected to pay it back. If they don't understand it, they should take the contract to someone who does and can explain it to them. If the mortgage agent falsely explained it to them, that mortgage agent has some responsibility, and since that agent is representing a mortgage company, that company has some responsibility.
Often mortgages are sold to other larger mortgage companies. What organization makes a purchase without evaluating whether it is a good purchase, or at least worth the risk involved? If a company purchases a risky mortgage, then they also now own the responsibility. What if the seller misrepresented it to them? Guess what - the owning company is still responsible for it, but they can use the courts to try to make things right, by suing the organization who lied about it. They can possibly even refuse to take the merchandise and demand a refund.
Okay. Back to Freddie Mac and Fannie May, and Citizen Chad's solution. It seems our government has forgotten many of the principles that it is founded upon. Like a free market. How about we let the free market work itself out? If the two large mortgage companies can't handle what they bought, they need to declare bankruptcy. That's what was put in place to handle situations like this. When that happens, they sell off all their assets (mortgages that they own), possibly for pennies on the dollar, but not necessarily. They just sell the assets to the highest bidder, which could be another mortgage company, the individual who originally took out the mortgage, or even a mom & pop diner that sells burgers to truckers, that happen to have some money that they could purchase a loan (if they decide it is worth the risk). The face value of the mortgage is not changed in any way. If someone buys a $200,000 mortgage for $30,000, the mortgagee needs to repay them the $200,000. What if the mortgagee declares bankruptcy and doesn't pay them the full amount? Well, that's the risk the purchaser has. Let the purchasers decide how much a mortgage is worth. If they feel it's risky, only bid $10,000 on it, or even $5 (remember that whoever owns the mortgage owns the property until it is paid off in full).
If we do this, who loses? The mortgage companies who bought the risky loans. They're gone, out of business. And guess what? New mortgage companies will pop up in their place, probably with stricter guidelines, and the bad mortgage agents will probably be out of a job. Which they deserve for lying on such an important decision to so many people. They'd better recall their burger-flipping skills. Mom and Pop want good burger flippers.
What do Mom & Pop do with the mortgage they bought that turns a profit for them? Whatever they want.
That will solve the problem.
That's the American way.
Most of them probably had responsible friends & neighbors who warned them that the loan was risky, but that advice went unheeded. It's possible that some people didn't receive any warning, being swindled by a mortgage agent who specifically did not tell them about the risks. I still think that person has a lot of responsibility, because surely they understand that $x,000,000 is a lot of money, and they are expected to pay it back. If they don't understand it, they should take the contract to someone who does and can explain it to them. If the mortgage agent falsely explained it to them, that mortgage agent has some responsibility, and since that agent is representing a mortgage company, that company has some responsibility.
Often mortgages are sold to other larger mortgage companies. What organization makes a purchase without evaluating whether it is a good purchase, or at least worth the risk involved? If a company purchases a risky mortgage, then they also now own the responsibility. What if the seller misrepresented it to them? Guess what - the owning company is still responsible for it, but they can use the courts to try to make things right, by suing the organization who lied about it. They can possibly even refuse to take the merchandise and demand a refund.
Okay. Back to Freddie Mac and Fannie May, and Citizen Chad's solution. It seems our government has forgotten many of the principles that it is founded upon. Like a free market. How about we let the free market work itself out? If the two large mortgage companies can't handle what they bought, they need to declare bankruptcy. That's what was put in place to handle situations like this. When that happens, they sell off all their assets (mortgages that they own), possibly for pennies on the dollar, but not necessarily. They just sell the assets to the highest bidder, which could be another mortgage company, the individual who originally took out the mortgage, or even a mom & pop diner that sells burgers to truckers, that happen to have some money that they could purchase a loan (if they decide it is worth the risk). The face value of the mortgage is not changed in any way. If someone buys a $200,000 mortgage for $30,000, the mortgagee needs to repay them the $200,000. What if the mortgagee declares bankruptcy and doesn't pay them the full amount? Well, that's the risk the purchaser has. Let the purchasers decide how much a mortgage is worth. If they feel it's risky, only bid $10,000 on it, or even $5 (remember that whoever owns the mortgage owns the property until it is paid off in full).
If we do this, who loses? The mortgage companies who bought the risky loans. They're gone, out of business. And guess what? New mortgage companies will pop up in their place, probably with stricter guidelines, and the bad mortgage agents will probably be out of a job. Which they deserve for lying on such an important decision to so many people. They'd better recall their burger-flipping skills. Mom and Pop want good burger flippers.
What do Mom & Pop do with the mortgage they bought that turns a profit for them? Whatever they want.
That will solve the problem.
That's the American way.
Comments
I told Chad to send this to the paper as an editorial. We'll see what happens.
I agree, though, that I am tired of us responsible Americans having to take care of all the irresponsible Americans out there. That's not the way it should work. And in order for our country to remain free, the government needs to step out and let the people govern themselves.
But, then again, if Obama is elected, that means that more than half of the population wanted him. And that translates in to more than half of the populations not knowing how to govern themselves or not believing in free market, since voting for Obama means you're voting to take one more step in the Socialist direction. It makes me crazy to think about! I mean, we don't want to be like the rest of the world. That's what makes the US powerful.
we were required to apply for unemployment insurance in order to get medi-cal (medicaid). We had phone interview and told the people that we quit our jobs of our own free will and choice and we have no intention of looking for a job. After making that very clear we never expected to hear from them again. But we recieved a notice in the mail last week that we are going to start recieving $450 a week in unemployment insurance benifits! Duh-- why are they paying us to not have a job when we quit and don't intend on looking for a job? dumb
The government should not be able to take over companies, even if they are about to crash. It's the free market's job to let them crash and burn, and let people learn from the mistakes. There HAS to be responsibility for the free market to work right. Without it, we are on our way to communism, quite literally - where the everyone owns an equal share in everything, and if one person doesn't do his / her job, they get taken care of anyway.