Comments on: The Housing “Plan” http://www.doublejourney.com/2007/12/07/the-housing-plan/ Going From Good To Great Wed, 08 Feb 2012 23:38:36 +0000 hourly 1 http://wordpress.org/?v=3.1.2 By: terrence http://www.doublejourney.com/2007/12/07/the-housing-plan/#comment-194 terrence Mon, 10 Dec 2007 19:44:04 +0000 http://www.doublejourney.com/2007/12/07/the-housing-plan/#comment-194 Lillian, My problem isn't with the moral hazard on the borrowers end, although I don't discount it as much as you do. It most definitely exist on the other end for the investors. Loans have been possible over the last several years because investors were willing to buy them. If you introduce the idea that the contract they signed may not be valid, you make future investors weary of buying these assets, making it that much worse for people to try and get a loan. Lillian,

My problem isn’t with the moral hazard on the borrowers end, although I don’t discount it as much as you do. It most definitely exist on the other end for the investors. Loans have been possible over the last several years because investors were willing to buy them. If you introduce the idea that the contract they signed may not be valid, you make future investors weary of buying these assets, making it that much worse for people to try and get a loan.

]]> By: Lillian http://www.doublejourney.com/2007/12/07/the-housing-plan/#comment-162 Lillian Fri, 07 Dec 2007 23:05:52 +0000 http://www.doublejourney.com/2007/12/07/the-housing-plan/#comment-162 Also, although I agree with you that this deal isn't very fair, I'm not sure how much of a Moral Hazard this will cause. I don't think people who will be buying houses in the future will think "Yes, let's risk ruining my credit by taking out a loan I may or may not be able to afford BECAUSE Dubya will bail me out." People who entered into these sub-prime loans don't really need a reason to screw up. People who are irresponsible will be irresponsible with or without the government's help. Forgive me for the analogy, but I can't help but compare it with who saying legalizing abortion will cause more women to get pregnant and get abortions. Having an abortion is a really traumatic experience (as I'm sure being close to losing your home is) and I don't think women would be more eager to get it on with someone just because they can get an abortion later. Also, although I agree with you that this deal isn’t very fair, I’m not sure how much of a Moral Hazard this will cause. I don’t think people who will be buying houses in the future will think “Yes, let’s risk ruining my credit by taking out a loan I may or may not be able to afford BECAUSE Dubya will bail me out.” People who entered into these sub-prime loans don’t really need a reason to screw up. People who are irresponsible will be irresponsible with or without the government’s help. Forgive me for the analogy, but I can’t help but compare it with who saying legalizing abortion will cause more women to get pregnant and get abortions. Having an abortion is a really traumatic experience (as I’m sure being close to losing your home is) and I don’t think women would be more eager to get it on with someone just because they can get an abortion later.

]]> By: Lillian http://www.doublejourney.com/2007/12/07/the-housing-plan/#comment-161 Lillian Fri, 07 Dec 2007 22:56:18 +0000 http://www.doublejourney.com/2007/12/07/the-housing-plan/#comment-161 Hi Terrence, Here's an interesting article regarding this: http://money.cnn.com/2007/12/07/real_estate/freeze_fairness.moneymag/index.htm It basically states that although the "irresponsible" borrowers will get an interest rate freeze, their interest rates were typically several points higher than what the prime borrowers got so it really wouldn't be much of a "bail-out." On the other hand, if mortgage interests rates adjust every 6-12 months, these people won't have to worry about it, while prime borrowers will. As for me, the only problem I have with this deal is what the guy mentions at the end of article: These sub-prime borrowers won't have to keep up their end of the deal, while responsible borrowers (like my mom and I) will. Hi Terrence,

Here’s an interesting article regarding this: http://money.cnn.com/2007/12/07/real_estate/freeze_fairness.moneymag/index.htm
It basically states that although the “irresponsible” borrowers will get an interest rate freeze, their interest rates were typically several points higher than what the prime borrowers got so it really wouldn’t be much of a “bail-out.” On the other hand, if mortgage interests rates adjust every 6-12 months, these people won’t have to worry about it, while prime borrowers will. As for me, the only problem I have with this deal is what the guy mentions at the end of article: These sub-prime borrowers won’t have to keep up their end of the deal, while responsible borrowers (like my mom and I) will.

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