Friday, December 14, 2007

Is the "Subprime Bailout" a Good Idea?

At Bizmology, Patrice Sarath wonders if subprime lenders are being adequately punished if they're required to leave borrowers' introductory rates as they are so as to help them avoid foreclosure. Is she kidding? The Sub-prime lenders, predatory or no, smart or no, loaned money to people who were exceptionally likely to not pay it back. That's why they charged such high rates, fees and prepayment penalties in the first place. Now, they won't benefit from the high rate as compensation for the great risk they took.

I'm not suggesting that this help from the government is not good or necessary. Actually, I think it is. (And as a disclaimer, I'm not a sub-prime lender.) But I'm not positive it helps the lenders anymore than getting higher interest payments from some borrowers and short sales or foreclosed houses from others would. It does relieve the stress of many homeowners and also helps the real estate market overall, because so many people won't have to sell their houses in desperation over the next year.

*As an aside, at MortgageFit I found this list of calculators, many of them mortgage related, but one that I used and found helpful was an IRA calculator that tells you if it's to your benefit to convert a traditional IRA to a Roth IRA.*

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