It may not be a slamdunk after all.
The bailout of homeowners who, because they financed their home with an adjustable rate mortgage and took out a home equity loan, are having so much trouble making their monthly payments, may not be as likely today as it seemed just a week or so ago.
The reason is that many homeowners who used fixed rate financing and did not take cash out of the equity in their home, that is, those who paid a higher monthly payment the past few years than those with ARMs and may not have lived as well as their home equity loan counterparts, are starting to express their anger about the possibility that those who bet that interest rates would stay low and home prices would keep rising may get bailed out by the federal government when that bet turns out to be bad.
The federal government has a history of these types of bailouts. For example, led by their federal representatives and senators, the government typically comes to the aid of homeowners in beach areas after a storm. That bails out those who decided not to pay for private insurance even though their neighbor might have been making payments for years.
There is a substantial difference between that and the current mortgage situation: there are far more people with fixed-rate mortgages than ARMS and they are distributed across the country. That changes the politics substantially because it will be far harder for Congress to ignore the strength of the fixed-rate folks.
One key to what may happen may be the states where most of the ARMs are located.
In the meantime, the housing market may end up having to do more to correct ityself than was thought likely.
You may be on shaky ground
You may be on shaky ground with the beach/flood issue....while FEMA helps people in emergency situations, the flood insurance program doesnt routinely bail people out. I think the larger issue there is the Corps of Engineers beach nourishment projects that do serve as bailouts, essentially re-building becahes that nature reclaims, mainly to save houses, etc (some in the WRDA field will I am sure take issue with that comment). -FC
The flood insurance program
The flood insurance program is not the bailout...It's the additional "emergency" dollars appropriated just for this purpose after there's a hurricane that is the real bailout.
"The bailout of homeowners
What about FHA Loans?
Do you think the government will start issuing more FHA loans? From what I've learned about FHA mortgage loans, they seem like the perfect way for the government to help bail out homeowners who can no longer afford their homes.
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