Last week the Bush administration decided to “freeze” for five years the interest rates of certain types of mortgages. You’ve probably caught the tail end of news stories about “subprime” home loans, lots of foreclosures, etc. Never a happy moment when the bank takes the farm.
So now the government has stepped in and said that, if you fall into a particular category of adjustable-rate mortgage (ARMs, in the biz) and you’re worried that it’s getting way too adjustable, don’t worry: The Nanny State is about to readjust it well inside your comfort zone. By fiat of the Treasury secretary, your adjustable-rate mortgage is henceforth an unadjustable adjustable-rate mortgage. These new UNARMs will spread their healing balm across the land until it’s safe enough for the housing “market” to once again be exposed to market forces.
The government has, in effect, nullified the terms of legal contracts mutually agreed by both parties ”“ borrower and lender, Mr. and Mrs. Joe Schmoe and the First National Bank of Pleasantville.
“wimpsville relativist milquetoast mush”
Heh heh. Mr Steyn sure has TEC figured. Maybe they should put this slogan on their official seal.
A great column and, as usual, spot-on. This mortgage bailout scheme is a horrible idea.
But Bush admits it is all voluntary, no one (bank, Mortgage company, etc. ) is forced to do anything.
Of course most mortage companies will recognize it would be better to have the old, lower payment coming in each month rather than having nothing coming it, and the wisdom of keeping the house heated during the winter at somebody else’s expense and occupied, so vagrants don’t move in, until the housing market starts to recover. So I imagine many of the large mortgage companies that haven’t already started re-negotiating terms will be doing so shortly. It is in their best interest to do so.
And if they hadn’t been so greedy for the origination fees they would not be in this mess to start with.
And any of those new owners that want to keep their house will be looking to re-finance to a fixed rate as soon as they can. Unfortunately many will have to admit they really can’t afford the house they that was sold to them, just as everybody can’t afford to drive a Cadillac Esclade. I have over the last 40 years had many real estate agents try to tell me I could afford payments up to twice what I stated I could manage. (Not one offered to make up the difference if I got in a hole)
I had sense enough to realize their commission check was based on the cost of the house I bought, and that if I firmly said “This is my limit.” they would show me something that I could afford, or I would go to an agent who would.
Bottom line – Too many greedy people – Buyers, Realestate agents, and mortgage brokers.
“By fiat of the Treasury secretary, your adjustable-rate mortgage is henceforth an unadjustable adjustable-rate mortgage….The government has, in effect, nullified the terms of legal contracts mutually agreed by both parties” —Mark Steyn
Steyn complains that the Bush Administration is abrogating private contracts. Is that true? The financial institutions that turned these mortgages into mortgage-backed securities have (as I understand it) contractual authority to make these sorts of modifications—and are choosing to exercise that authority. If so, then there is no breach, no abrogation, no reason for Steyn to get his bowels in an uproar.
Perhaps Mark Steyn would like to bring back debtors’ prison. Now there’s a contract-enforcement device to warm the heart of a social darwinist ideologue.
In Europe, the established church, whether formal (the Church of England) or informal (as in Catholic Italy and Spain), killed religion as surely as state ownership killed the British car industry. When the Episcopal Church degenerates into wimpsville relativist milquetoast mush, Americans go elsewhere. When the Church of England undergoes similar institutional decline, Britons give up on religion entirely.
So, the Brits have no choice in church? There are no Methodists, no Baptists, no Catholics, etc?
I expect more forthrightness than this from Steyn.
Has Steyn complained about all the airlines, manufacturers, and other large corporations that go through a chapter 11 bankruptcy proceeding to shed inconvenient contracts? Think Delta, Northwest, US Airways, and United. Think Delphi.
Chapter 11 reorganizations really do abrogate contracts: that’s the whole reason solvent corporations choose to go through them. And individual creditors don’t get to say no. There’s even a “cram down” provision under which a court can impose a reorganization of a whole class of objecting creditors.
Does any of that bother Steyn? Probably not. Let the wealthy and powerful abrogate contracts they find inconvenient. Then fulminate about voluntary debt relief for little people in danger of losing their homes. Spot on, as usual.