Wall Street Welfare

Bailout Plan: Since we share the blame, let’s share the payoff!

I am a little confused by this Wall Street Meltdown business. Are they saying that this whole crisis was caused by people like me, who qualified for a so-called “sub-prime” loan? As Steve Urkel used to say on his TV show, “DID I DO THAT?” The answer is a resounding HELL NO!

Anyone who bought a home in the last three years, took the plunge because the real estate market was so white hot! Properties were escalating in value at unbelievable rates; sometimes as much as five per cent a year. So if you did your research and picked a good property, your chances were good for having a home that was instantly worth more than you paid for it. These loans were marketed to consumers as a way to get in the door, make the payments, and then refinance the loans with the new “instant” equity.

The risk with a “sub-prime” loan was in the fine print. The loan would reset after two years and the payments would certainly go up, no matter what happened. If you made your payments on time, the payments would still go up! If your credit score went up 100 points, the payments would still go up. Perhaps even more bizarre is that these loans were nearly 100 per cent interest; which was pure profit for the lending institutions.

Here’s where the GREED enters the picture. There is no reasonable explanation for why the loans were set up in such a way to guarantee that the payments would increase. These banks and lending institutions were determined to maximize their profits by either forcing the homeowner to pay more or forcing them into foreclosure. Either way the banks thought they would win because they would have received two years of payments on the purchased property. Those payments would substantially reduce their exposure on the loans and allow them to resell the same home at a profit if/when the buyer defaulted. But the banks didn’t expect the real estate market to go so cold, so fast and they suddenly found themselves with a lot of foreclosed property they couldn’t move.

What do you suppose would have happened if these same banks had tried to work with the homeowners who needed help? Instead of using escalating payments to force people out of their homes, they could have worked to keep those buyers as customers. They should have worked to make those payments affordable for homeowners, the same way they wrote the loans in the beginning. Today those banks would have thousands of happy homeowners, instead of thousands of empty houses that keep dropping in value every day.

But the other piece of the puzzle is the financial institutions that bought and sold home loans at the drop of a hat. Two months after I bought my home through Homebanc, the loan was sold to another mortgage company with terrible customer service. For instance, they wanted to charge me $10.00 to pay my mortgage through their website. Let me say that again; there was a FEE for me to pay my bill online! How do you justify that kind of clip-joint mentality? That’s not the way that you generate trust with your clientle; not the way that you win friends and influence people. But it does reveal the mindset of these profit at all cost companies that are begging for our help now, from the same people that they’ve been ripping off. This crisis could have been averted if a little common sense and compassion were part of the plan.

Before we move on from the “sub-prime” loan mess, let’s don’t forget the insider scams that ripped off the system for millions of dollars. Scores of mortgage brokers, real estate agents, and appraisers formed partnerships, built on a foundation of greed and deceit. These predators bought homes at discount prices and then used phony appraisals to resell the properties at inflated prices. A $50,000 home would be appraised at $125,000, and then resold to a fake buyer for a $75,000 profit. Then the same house would be resold again and again for escalating prices, even though no improvements were made. Finally, the last fake buyer would default on the last big loan and the bank would foreclose. It wasn’t until then that the bank discovered that the home was only worth the original $50,000; considerably less than the phony appraised value of $400,000. These insider scams contributed greatly to the mortgage meltdown, but you don’t hear much about them now.

Who was responsible for the oversight of those phony loans and the way they were processed? These rip-offs were strictly inside jobs by greedy people who knew how to manipulate the system and get away clean. There are entire neighborhoods that were devastated by these white collar thieves, who left behind a trail of vacant houses in various states of disrepair. Imagine the impact on homeowners in those neighborhoods who were just trying to own a home of their dreams. What do you think happened to property values in those areas, because of this housing pyramid scam? None of these victims ever worked on Wall Street!

Yes, you would think the “sub-prime” home buyers are the ones who caused the failures and problems at Merrill Lynch, Goldman Sachs, Lehman Brothers, Morgan Stanley, Freddie Mac and Fannie Mae. That’s why they need this 700 billion dollar bailout, which the government claims will save the country’s financial institutions. Well I’m all for helping out the Wall Street unfortunates and giving them a little welfare money; but let’s flip the script just a little bit.

Let’s recalculate the $700 billion dollar bailout and add enough to give one-million dollars to every American who paid taxes in 2007. This payout to taxpayers would be used to pay off or pay down their debt on homes, cars, credit cards, and other installment loans. This plan would make many of us debt free, with a tidy profit left over. The beauty is that we’d be paying off the banks and bailing them out from the ground up. Talk about an economic stimulus plan. I can’t wait to get that check!

One final piece of advice for consumers who have money left over. Whatever you do, don’t put all of it back in the bank!

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