I was listening to piece on "60 Minutes" last night about the mortgage crisis and I got to thinking about four things. First, the "stimulus package" is in response to the economy slowing down, which was caused by the mortgage crisis. How does the "stimulus package" change the fact that people aren't paying their mortgage? Okay, some of us will get a grand or so, which I would guess for most of us isn't even a month's payment, but it doesn't change the fact that people aren't paying their mortgages. The bottom line is I don't see how the "stimulus" alleviates the mortgage crises?
Two, I can't help but think we are running out of assets that allow us to consume. Americans have tapped out the equity in the homes. The Government has effectively max'd out on tax cuts to "stimulate the economy" - did anyone notice they haven't really worked - and now we are using targetted, one-time cuts to "kick start" the economy. What happens when everyone spends their "stimulus" check? Where does the money come from then to fund our over zealous spending habits?
Three, what were some of these lenders thinking? Didn't they realize some of the borrowers were bad risks. I can't help but think that some borrowers failed to properly underwrite their loans. Did either the borrowers or lenders realize that the value of the property could go down in value, which would prevent refinancing? And, what effect did the Bankruptcy Bill have on borrowers lending practices?
Four, what mortgage guy would recommend to a normal Joe that an ARM was a good idea. It's the classic example of creating risk and then allocating the risk to the person who least undertands it and is least able to pay if the risk turns bad. It's just another example where allowing people to handle their own money goes really bad and ends up hurting us all, including those of us who understood the risks of ARM's and avoided them.
I'd be interested in hearing others points of view. In short, I get real frustrated in how some borrowers were taken advantage of by lenders. How some lenders were taken advantage of by borrowers. And how the bulk of us will ultimately pay in some fashion for what looks to me to be the failure of a market.