Reducing Mortgage Values
During the Vice Presidential debates when Joe Biden said he wanted to enable courts to not only reduce the interest rates of mortgages, but also the amount of the loans I yelped. What the? Who the? We’re going to do wha? I thought for sure my head was going to explode. I understand that people were sucked into market prices on this whole thing, but how is it that we are going to reduce the value of the loans off the top? Last night, John McCain apparently has jumped on the mortgage value reduction bandwagon. ACK! Two parties. Two “choices.”
This is pure insanity. Who doesn’t want the value of their mortgage reduced? But how do you do it? You are going to have taxpayers buy a mortgage with $100,000 owed for 30 years, for example? Let’s say that interest rate is 7%. So that means the monthly payment is approximately $665 per month. So then, in order to reduce the monthly burden on someone, we are going to reduce the value off the top? So now we are going to basically give the person, what, 20% off the top? 20,000 bucks? That puts the value of the loan at $80k and reduces the monthly payment to about $532. That’s great and all, but guess who just gave away that $20,000 bucks? We all did.
How about increasing the number of years on the mortgage or lowering the interest rate? If you take that same $100,000 loan and reduce the interest rate to 5% the monthly payment becomes almost $537 per month. The difference? The taxpayers who are funding the rescue won’t lose 20,000 on paper, and will earn 5% on the 100,000 investment assuming the homeowner doesn’t default.
And if you really want to help out the homeowner even more, increase the number of years to 40 on the loan. Lower the interest rate to 5% and it takes the monthly payment all the way down to about $482 per month.
But please please please, let’s not reduce the amount of money owed on these houses. That really turns this thing into a bailout, rather than a rescue. If you give people free money, it is a bailout. If you help reduce their monthly burden by changing the terms it is a rescue.
But seriously, where are the choices? I know these candidates have some fundamental differences between them. The two of them point it out all the time. But, they also have a lot in common. Apparently they are feeling the same on the bailout / rescue plan. We know they have the same basic policy concerning gay couples and wanting them to have rights, but not the word “marriage.” Sure there are differences, but nowhere near the level of differences that were apparent between Gore and Bush and Kerry and Bush.
Change has been Obama’s mantra, and McCain tried to steal the change thunder a bit. One thing that is guaranteed in this election is a HUGE change from George W. Bush no matter which of these guys gets elected. And if they both want to change the value of mortgages, expect the market value of your house to change bigtime too, even if you aren’t fortunate enough to have your loan reduced.
I Approve This Message Moratorium
Unless you are a politician and you have to do so, nobody should end their commercials with “and I approve this message.” If you are a local car dealer, mattress salesperson, financial consultant, pool cleaner, landscaper, and yes, even an insurance person, you should not look to attempt to “cash in” on the comedy gold of the election season by pretending your advertisement is a political ad. It is right up there with Viagra jokes in terms of being fresh, interesting and funny.
Speaking of which, I had a friend who went to Chicago a couple weeks ago to see Robin Williams. It has been a hobby of mine to watch Robin Williams whenever he is on TV to see if he makes a five-years-too-late joke about Viagra, and when Robin goes into one of his irreverant ramblings, he can’t resist making a joke. Can’t resist.
So, I asked my friend to count the number of times that Robin referenced Viagra in his stand-up performance in Chicago and the answer came back even better than I ever could have hoped. Apparently, Robin Williams referenced Viagra a reported FOUR TIMES.
Can you get any more out of touch than that? What’s next? Jokes about airports and airline food?
