Bush Plan To Aid Financially Illiterate

I am stunned by the contradiction in President Bush's statements regarding further federal interference in the home mortgage market.

He outlines a plan

to stem the rise of mortgage defaults

and asserts that

"government has got a role to play" in helping homeowners struggling to hold onto their homes.

The blame for the problem of course lies with sub-prime adjustable rate mortgages.

The president singled out the popularity of adjustable-rate mortgages among subprime borrowers as "one of the most troubling developments." These types of mortgages start with low introductory rates that later rise sharply. As the higher rates kick in, some borrowers are caught by surprise and miss payments.

But the President also said

"It's not the government's job to bail out speculators, or those who made the decision to buy a home they knew they could never afford," Bush said. (emphasis added)

So the basic outline of the Bush sub-prime plan is to stem the tide of defaults by helping people who are not defaulting because they didn't buy a house they can't afford.

Here's an interesting fact the President might want to give a few seconds of thought. If your adjustable rate mortgage can adjust to a rate that you cannot pay, you bought a home you could never afford.

When you take out an adjustable rate mortgage, somewhere in the massive piles of papers you have to sign (many of them to satisfy government requirements) the terms and limits of the adjustability of the rate are spelled out. If you can't afford to pay the highest rate your mortgage can adjust to, you can't afford that mortgage.

I didn't see the actual press conference so I don't know if the part about borrowers being surprised by higher payments is the reporter's contribution or a paraphrase of something Bush said. I do know that being a financially illiterate moron apparently qualifies you for Federal intervention. Anyone who signed up for an adjustable rate mortgage and was surprised when the rate adjusted and their payment went up (again it's all there in the paperwork you signed) is an idiot.

The Democrats aren't all that thrilled with Bush's plan either. Not that they agree with me. No. They think he's not doing enough.

Posted by: Stephen Macklin at 04:55 PM | Comments (3) | Add Comment