Get To The Root Cause Before The Bailout
I am not opposed to doing something to fix the financial crisis, although the Newt Gingrich proposal seems to be more rational than just throwing $700 billion dollars at the problem. You can read what Newt had to say about the 'bailout' in an interview with Greta Van Susteren here
It seems that any 'bail-out' of the banking crisis should include basic revisions to the mortgage guidelines that brought on this crisis. None of the proposals I have seen get to the root cause of the problem and if the root cause is not addressed we will revisit this problem in a few short years. Although it will keep the demand for new and resale homes lower than perhaps most would like, revisions to the mortgage guidelines should include:
1. There should be no more adjustable rate mortgages for people who do not have the obvious means to pay for the mortgage if/when it increases.
2. People should not be approved at the 'teaser' interest rate of an adjustable rate mortgage.
3. There should be no more 'no money down' deals. Everyone should have to put at least 5% down.
4. There should be no mortgages given to those who have poor or marginal credit.
Everyone should keep in mind it is not a 'right' to own a home, and it is not the end of the world to rent, rather than purchase, a home.
Posted by Rick | September 26, 2008 02:24 PM