Should American taxpayers be expected to bail out sub-prime borrowers & lenders?
By rodney850
@rodney850 (2145)
United States
April 3, 2008 9:31am CST
Through a chain of events I will not discuss here I am involved with a "sub-prime" mortgage. Everything was great for a while and then the interest rates started to climb and about every six months my mortgage would increase. It went from 558 per month to its present state of 736. Now I did use my head in one sense in that my wife and I purchased a house we were comfortable in and also well within our means of affordability so the price hikes haven't hurt much (except while my wife was out of work for about 9 months)and we have been able to not only keep up but live comfortably! Last week, along with my monthly statement from my mortgage company I recieved another payment change letter which immediately got my blood pressure up, but when I actually read the letter it told me my payment was going down and by nearly 100 dollars! I knew it was possible for an adjustable mortgage to go down but had quite frankly never heard of one doing so.
Now I know there are many people out there who didn't use any good judgement when purchasing and financing their homes with "sub-prime" financing so most stories don't end this happily but my question is;
Why is it my responsibility as a taxpayer to bail out all of these other people who have gotten THEMSELVES into this mess? I know people, especially first time buyers, get caught up in the dream of home ownership but that doesn't excuse them from not reading and knowing what they signed!
On the lending side, these lenders KNEW the people they lended to were high risk at best so why should the American taxpayer bail them out of their mess? I also know there are extenuating circumstances like job loss(boy do I ever know)but to lump all of it together is not acceptable!
I wouldn't mind helping the ones who are losing their homes because they also lost their jobs but the ones who went into this with their eyes wide open KNOWING they couldn't afford the home in the first place don't deserve or need my help!
2 people like this
6 responses
@Destiny007 (5805)
• United States
3 Apr 08
No, neither the lenders or borrowers should be bailed out by the taxpayers.
The lenders made risky loans and the borrowers took out loans that they knew they might have trouble repaying.
Neither was wise but the decision was theirs to make, and the responsibility is theirs to deal with it all.
Nor should we be asked to bail out those unregulated investment banks that are a big reason for the economy. There was no reason for the federal Reserve to help them because they are not kept to the same standards and rules as regular banks.
Some of their investment schemes involved things that some experts didn't even understand and that they shouldn't have been doing.
I view an investment bank a lot like a gabling house, so why should we bail out these places when they get into trouble?
1 person likes this
@Destiny007 (5805)
• United States
3 Apr 08
Well if they do, I'm going to Vegas! 
1 person likes this
@rodney850 (2145)
• United States
3 Apr 08
Great point Destiny! I wonder if Vegas has a particularly long run of bad luck would the FED bail them out?
1 person likes this
@peavey (16936)
• United States
3 Apr 08
Your frustration is well understood. I don't like having to pay for other people's mistakes, either... but the reason to bail them out doesn't have so much to do with them as it does with the economy. If they can keep their homes, it will keep a glut of houses off the market, which will make those on the market easier to sell, which will help the housing market recover, which will help the overall economy... am I making sense?
When people default on a loan, it affects a lot more than just them. Lending institutions lose money and can't loan to someone else, who can't then can't buy, so the manufacturer has to quit making so much, and jobs are lost, then those out of work people have to default on their loans... and the merry go round continues.
@rodney850 (2145)
• United States
3 Apr 08
I understand what you are saying and agree to an extent. I know the economy is in dire need of a boost and that a glut of homes on the market will in fact devalue my home! On the other hand I also know that to bail these people and companies out without some consequences for their lack of judgement will just exacerbate the problem.
1 person likes this
@peavey (16936)
• United States
3 Apr 08
Good point. I think the problem is deeper and more complicated than that, though. If we don't bail these people out, many of them still won't learn from it. They'll just be leeches on society, complaining that they never get a fair break. Not all, but many. I've seen it happen over and over again.
When people don't feel obligated to make wise money choices, or don't even know that they should, something's wrong. America has been on a downhill slide educationally and morally for some time. I think we're just beginning to see the fruit of that.
@redyellowblackdog (10629)
• United States
3 Apr 08
In the "Land of the FREE and the home of the BRAVE" there should not be any bailouts. People who are FREE accept responsiblity for their own actions. People who are BRAVE face up to their own problems.
@gewcew23 (8007)
• United States
3 Apr 08
Please Rodney we do not need to bail out either the sub-prime or the lenders. The borrowers did not have to take the loans, and the lenders did not have to lend the money. I pay my month house mortgage on time every month. True I did not get the adjustable rate mortgage, or the interest only loan, but if someone did and now you cannot pay your mortgage,I do not fell sorry for you. You are nether respondsible to pay for my mortgage, just as I am not respondsible to pay for your. High risk loan are just that High risk. What part of high risk do these people not understand. You must now what you can pay for, and what you cannot. I believe that is what is wrong with credit cards. People get there hands on these little plastic card and think they can go out into the world and buy anything. Then when the bill come in and they cannot pay it off they are in trouble.
@sizzle3000 (3036)
• United States
3 Apr 08
I did the refinancing when the percentages droped. I did not do the adjustable morgage because I knew that the payment would go up and up. I know what I can afford and what I can not. I also did not refinance for the full value of my home. This means I still have equity in my home. I do not have to worry about refinancing again for ten years.
I am not saying that there are not people that were not pressured into getting in too deep. There probably were. However, if they used common sense they stayed with in their means. That means if you could not afford your home before the refinance you will not be able to affort the rate increase now.
I also do not think that I should have to pay higher taxes so that these people can keep a home they could not afford anyway. People need to take responsibility for their actions. It seems like someone is always bailing someone out and as long as this keeps happening there is no lesson learned.
I had no problem making my house payment before I refinanced and I have no problem making it now. There are not a lot of people who refinanced that can say that.
@jormins (1223)
• United States
3 Apr 08
Should American taxpayers have to bail out Bear Stearns? Enron? Worldcom?
I do agree with you though, we can't totally bail out the housing crisis however to totally ignore the problem will only hurt the economy more. We need to find a happy medium. To ignore the problem would hurt the economy even more, but you're right its not fair to the tax payers just like we have to bail out the big corps in the same way. It should be illegal for what some of these lenders did to first time house buyers.
@rodney850 (2145)
• United States
3 Apr 08
I wasn't aware we bailed out Enron and Worldcom and I believe the Bear Stearns jury is still out but I do remember a Chrystler and Savings and Loan bail out! To bail out private industry with funds from the backs of America's workers is wrong! I could see bailing the homeowners more than the businesses!
Yes, some new lending laws need to be enacted so unscrupulous lenders can't take advantage of people too high on the idea of a home to pay attention to what it is they are signing! I don't know where the middle ground is but I do believe it is the American taxpayer who will inevitably get the short end of the stick and it s/ucks, big time!
1 person likes this
