Under Water

The grand new plan to make everything okay..

To qualify, borrowers would have to be at least three months behind on their home loans, and would need to owe 90 percent or more than the home is currently worth. The interest rate would be reduced so that borrowers would not pay more than 38 percent of their income on housing expenses, the industry official said. Another option is for loans to be extended from 30 years to 40 years, and for some of the principal amount owed to be deferred.

I wonder if anybody has done a study of foreclosures from the past few years to check and see if reducing the interest rate to zero would bring the payment within 38% of their housing expenses, or if the home owner could even make the payment with a zero interest rate. I rather doubt it. People are not just a couple hundred bucks off from making their payment. It's more likely the difference is much higher.

This issue of people being "under water", ie. owning more on the house than it's worth, is a red herring. If you could make the payment before, the value of the house is irrelevant to making the payment now.

In any case, this is all silly because it rewards people for not making their mortgage payments that everyone else continues to do.

Wasn't the last "bail out plan" the grand plan? Are they just going to keep rolling out new plans until, eventually, the government just makes everyone's mortgage payment for them? Seems like every other month there's some new urgency, that doesn't change anything.

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The automotive industry is also in it's own crashing bubble. The "Big 3" are either going to get massive government hand-outs, or they're going to crash and burn.

Just like houses, I always wondered who all those people were that could afford all those expensive cars. Turns out.. there weren't really that many. When the means of transportation costs as much, or more, than the yearly salary of your average American, you know trouble is coming.