Tuesday, November 6, 2007

Countrywide rewards Deadbeat Customers

When will people finally get it?

If you want to have capitalism, you have to let the free market play itself out no matter who gets burned for making bad investments, or how severe the
repercussions are for poor risk assessment. You need to take your beating like a man and learn from your mistakes (i.e. Returning to lending standards where people actually have to a job in order to buy a house)

If you want socialism,
that's fine, but no more multi-million dollar incomes, Wall Street, and free market economy. You can't have your cake and eat it too.

It is disgusting that policy's and bailouts are being implemented to protect company's and industry's from the consequences of their poor choices. This is what is referred to as "MORAL HAZARD".

A moral hazard is created when someone can take the most absurd of risks with their own or other peoples money knowing that if they succeed they will be rewarded beyond their wildest dreams, and if they fail, no worries, they will be bailed out at the tax payers expense.

Why are responsible people paying for the irresponsibility of others? It is simply sickening.

Lets take a look at some quotes from a recent CNN article highlighting Countryside's mind numbing new policy of rewarding dead beat subprime toxic loan holders at the expense of the responsible and truly deserving borrowers.

NEW YORK (CNNMoney.com) -- Not everyone is happy about mortgage lenders' latest efforts to help troubled borrowers.

Take Teresa Nelson. Instead of going for an adjustable rate mortgage with its lure of low initial rates, she opted for the security of a 30-year fixed at 7.10 percent for a house she bought in Pinellas Park, Fla. in December, 2005.

"I was well aware of what an ARM meant, and was staying far away from those snake-oil pipe-dream promises," Nelson said. "I also wasn't shopping for a short-term, big payoff investment - I was looking for my home, until I retire."

But many delinquent subprime borrowers who went for low teaser rates that shot up to unaffordable levels are now paying lower rates than Nelson as part of a new round of foreclosure prevention packages. And she doesn't like it.

For example, one subprime borrower had a riskier hybrid adjustable rate mortgage (ARM) with a rate of just under 7 percent that was going to reset in December to 10.5 percent. But last month, as part of a new bailout plan from Countrywide Financial, the lender gave him a rate reduction to 5 percent on his loan, saving him hundreds of dollars a month.

Nelson feels cheated and has little sympathy for people who she believes weren't as careful as she was. "Everybody was seeing dollar signs," she said, "and let their greed get the better of them. So, no. No bail-out, no assistance with my tax dollars. Not one red cent."

She's not alone. Last month, many CNNMoney.com readers expressed outrage to bailouts - whether they involved tax dollars or not - after Countrywide announced good deals for bad loans.

Countrywide said it will refinance or restructure loans or reduce interest for hybrid ARM borrowers whose rates are scheduled to reset. And no one will have to pony up prepayment penalties for retiring loans early.

Countrywide then announced it will rework loans, prime and subprime alike, for any troubled borrower, adjusting payments to reflect what individuals can afford. The company will administer the program with non-profit community advocate, the Neighborhood Assistance Corporation of America (NACA). Some troubled borrowers will escape with refinanced loans as low as 5.25 percent...

This is the quote that disturbs me the most

But his company is also restructuring loans for delinquent borrowers, who now will pay at the initial low "teaser rates" for an extra five years for huge savings. They could have seen their payments rise by 30 percent, 50 percent or more. That's great for them, but many responsible borrowers, like Nelson, feel like chumps.

Bailey said he understands their anger but said, "That's a situation where the greater sin is letting their homes go into foreclosure. You have a vacant home in the community and drive down the property values of neighbors."

WRONG! That is exactly what needs to happen!

House prices were driven up by greed, speculation and "Flip that House" wanna-be's watching TLC. The housing market will recover when house prices fall back to reasonable levels in line with income.

Let the market play itself out and stop trying to maintain ridiculous house prices by keeping gamblers in their house with fixed teaser rates and taxpayer bailouts.

Am I the only one who sees the problem here?

If you want to have capitalism you need to let people feel the sting for bad choices they make. Not pass those consequences on to those who were responsible while rewarding the dumb and

Are you angry yet? You should be!

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